Aircraft Management Companies – Most Costly Errors
Aircraft Management companies are entrusted with precious cargo, a companies executives, clients and even their families. Management companies often have the complete confidence of the aircraft owners because either of their experience/reputation or because the principal, either CEO or aircraft owner knows and trusts the lead pilot and the CEO of the management company.
Most management companies put their emphasis on safety. Safety is critical, but where many management companies are lacking is in their back office. The management companies back office staff are often overworked and work in a very complicated and dynamic world of accounting and bookkeeping. They track and record what happens thousands of miles from their home offices. A management companies’ emphasis on safety is expected but what is less common is a management companies’ emphasis on their back-office and accounting procedures. If the management company loses one of their back-office accounting people, it can often take 6-9 months to replace that person and get them trained to a reasonable level. Most management companies want to do the right thing but the errors that come out of the back office can cost an aircraft owner 10’s of thousands of dollars.
What is the biggest error that you have ever seen in all your years involved in managing private aircraft? When we started this company, we knew there was a need for this service since there were so many errors that happened on a routine basis in such a complex invoice. It is impossible to catch everything but as an organization that looks after a client’s interests, the toughest item to catch is often the most impactful to the aircraft’s bottom line. The most impactful error is having an invoice applied to the wrong aircraft. This is exceedingly common especially in larger management companies. This could be a fuel receipt or even a part that was purchased for a different aircraft. We have seen these parts be in the tens of thousands of dollars and sometimes even into the six figure range.
How could this happen? Good controls can mitigate errors and in the organizations that we were in we often put these in place but even with good controls things get missed. They can be accidentally coded to the wrong aircraft or put in the wrong bin. In some cases things can be more nefarious. This does not even mention instances of procurement fraud or phantom parts. That happens in the industry and when it does, it is often hushed and quieted up by the management company. We know what to look for because we have seen these things happen before.
Most management companies want to do the right thing and keep their clients, the aircraft owner happy. Even with those good intentions, errors are often made and by employing us to help find those errors you not only save yourself money but you can also help to highlight “quality escapes” from your management company. Working together, we can help improve the service from your management company or flight department which can only help to make them better in the future.