In the maritime and shipping world, acronyms are everywhere, often leading to confusion for even the seasoned players in the industry. Two of the most commonly used acronyms are PDA and FDA, which stand for Proforma Disbursement Account and Final Disbursement Account, respectively.

PDA and PDF in shipping refer to two types of accounts that play a crucial role in the logistics and financial aspects of shipping. In this blog, we’ll dive into PDA and FDA in shipping, divulging what they are, why they are important, and how they differ from each other. Let’s go!

First, What is a Disbursement Account?

A Disbursement Account, also known as a DA or D/A, is an itemized list of expenses and charges incurred by the shipping company during its voyage. These expenses can include bunkering costs, crew wages, port fees, repairs and maintenance, and other miscellaneous costs. The DA is typically prepared by the local agent who handles all financial matters on behalf of the shipping company.

The purpose of a DA is to provide a detailed breakdown of all expenses related to the vessel’s journey and to ensure that they are accurately accounted for and paid. It serves as a record of all financial activities between the ship owner or operator and the port authority or service providers.

In most cases, the DA will be presented to the shipping company upon completion of its voyage, along with all the necessary supporting documents such as receipts and invoices. The shipping company will then review the DA and make any necessary adjustments or disputes before settling the final payment.

What are PDA and FDA in Shipping?

A Proforma Disbursement Account or PDA is a document that outlines the estimated costs for a port call, from the point of loading to final delivery. It is usually prepared by the shipping agent and includes charges such as port fees, transportation costs, and other miscellaneous expenses.

On the other hand, a Final Disbursement Account or FDA provides an itemized list of actual expenses incurred during the shipping process. This document is generated after the shipment has been completed and all costs have been settled.

How to Produce a PDA (Proforma Disbursement Account)

Worker observing shipping containers in a ship yard(PDA and FDA in shipping)

Creating an accurate PDA is an art as much as a science, involving detailed knowledge of port costs and the specific needs of each vessel. An effective PDA ensures that funds are available to cover all potential expenses without tying up unnecessary capital. Here, experience plays a huge role—knowing the nuances of different ports can lead to more precise estimates and smoother operational flows. 

Here are detailed strategies to enhance the accuracy of your PDAs:

1. Gather Accurate Port Details

Each port has its own set of fees and regulations, which can significantly affect the overall costs of a port call. Here’s how to manage this effectively:

  • Research Comprehensive Port Tariffs: Each port authority usually publishes their tariff schedule, which includes detailed fees for all possible charges such as pilotage, towing, and mooring. Keeping this information up to date is crucial as tariffs can change based on economic factors, port management decisions, or local governmental policies.
  • Engage with Port Authorities: Direct communication with port authorities can yield insights into any pending changes in tariffs or additional fees that might not be well-documented yet.

2. Communicate with Local Agents

Local agents act as your eyes and ears on the ground and are a vital source of real-time and accurate information. Effective communication with them can lead to more reliable PDAs:

  • Regular Updates: Establish a system where agents regularly update you on any changes in port operations or pricing. This could be through scheduled reports or real-time alerts.
  • Build Strong Relationships: Foster strong, ongoing relationships with agents to ensure they provide detailed and preferential information. Trust and reciprocity can encourage agents to go the extra mile in gathering data.
  • Verification Process: Implement a process where information provided by agents is verified through multiple sources to ensure its accuracy. This might include cross-referencing with other agents, port authorities, or available databases.

3. Review Previous PDAs

Historical data is invaluable in predicting future needs and costs. Regularly reviewing past PDAs against actual expenditures (FDAs) can refine the accuracy of future estimates:

  • Identify Patterns and Anomalies: Look for trends in port cost by location for similar voyages and identify any anomalies. Understanding why certain voyages deviated from the norm can provide insights into potential adjustments for future PDAs.
  • Feedback Loop: Create a feedback loop where the team responsible for settling accounts provides insights back to the team preparing PDAs. This can help in understanding and adjusting for any regularly occurring discrepancies.
  • Document Everything: Maintain comprehensive records of all PDAs and their subsequent FDAs. Documenting justifications for estimates and any deviations observed can serve as a learning tool and a reference for future account preparations.

By implementing these detailed strategies, shipping companies can enhance the accuracy of their Proforma Disbursement Accounts, leading to better budget control, reduced financial risk, and improved relationships with port authorities and service providers.

How to Produce a FDA (Final Disbursement Account)

Cargo ship on the ocean

Once the ship sets sail from the port, the Final Disbursement Account is prepared. This account reflects the actual expenses incurred and is vital for auditing and financial reporting. Accuracy here not only affects financial records but also trust between ship operators and service providers.

Creating an accurate Final Disbursement Account (FDA) is critical in ensuring that all parties involved in a maritime operation are billed correctly and are in agreement on the charges incurred. Here are some expanded tips on how to ensure your FDA is accurate and reflective of actual expenses:

1. Verify All Receipts

Ensuring every charge on your FDA is justified with a receipt is fundamental to maintaining accuracy and transparency. Here’s how to manage this process effectively:

  • Comprehensive Collection: Collect every invoice, receipt, and financial document related to services rendered at the port. This includes, but is not limited to, tug assistance, pilotage, berthing fees, and cargo handling.
  • Digital Management: Use digital tools to store and manage receipts. These tools can help in tracking and retrieving documents easily, making the verification process more efficient.
  • Reconciliation Practices: Regularly reconcile receipts with the entries in the PDA. This should be done in real time where possible to address any discrepancies before they escalate into disputes.

2. Check for Discrepancies

Discrepancies between the Proforma and Final Disbursement Accounts can lead to disputes and delayed payments, impacting operational efficiency and relationships with service providers.

  • Detailed Comparison: Line-by-line comparison of the PDA and FDA should be conducted to identify any variances. Each variance should be documented and analyzed to determine its cause.
  • Root Cause Analysis: Understand why discrepancies occur—whether they are due to estimation errors, unexpected changes in port charges, or service variations. This analysis can help in refining future PDAs.
  • Engage with Local Agents: If discrepancies are identified, discuss these with your local agents to understand if there were unforeseen charges or changes in local pricing.

3. Update Stakeholders

Keeping all stakeholders informed about the status of disbursement accounts is key to maintaining trust and transparency. Effective communication also helps in managing expectations and resolving issues promptly.

  • Regular Updates: Establish a routine for updating stakeholders about the status of disbursement accounts. This could be through automated emails, dashboard updates, or regular calls.
  • Transparency in Communication: Be clear and detailed in your communication. Provide stakeholders with detailed reports that include both the PDA and FDA, highlighting any discrepancies and the reasons behind them.
  • Involve Stakeholders in the Process: When discrepancies occur, involve stakeholders in the resolution process. This can include discussing potential reasons and deciding on the steps to prevent similar issues in the future.

By adhering to these expanded tips, companies can ensure that their Final Disbursement Accounts are accurate, reflective of actual costs, and transparent to all parties involved. This not only aids in financial management but also builds a foundation of trust and reliability with partners and service providers in the maritime industry.

Two workers in orange vests looking over documents at a port

Who is Responsible for Paying for Disbursement Accounts? 

Responsibility for disbursement accounts can fall to various parties depending on the nature of the voyage and the agreements in place. Typically we see four different scenarios:

1. Voyage Charterer: A company may hire a vessel for a specific voyage, meaning that it is chartered. In this case, the charterer may be responsible for paying disbursement accounts related to port fees and other services necessary for the voyage. This should be outlined in the charter party agreement.

2. The Owner/Operator: In some cases, the owner or operator of the vessel may take on the responsibility of paying disbursement accounts. Again, this should be clearly stated in the contract between parties.

3. Time Charterer: If the vessel is being chartered on a time charter basis, the time charterer may be responsible for paying disbursement accounts related to the running and maintenance of the vessel. This includes fuel, crew wages, and other operational expenses.

4. Split Cost: In certain situations, the costs of disbursement accounts may be shared between the charterer and owner/operator. This can be negotiated and specified in the charter party agreement. This is sometimes referred to as “the principal agency relationship.” when the vessel agent acts on behalf of the Principal (i.e., the shipowner, charterer, or operator).

Can I Automate the Production of Disbursement Accounts? 

Two workers in yellow vests talking in front of a ship at a dock

Yes, there are various software programs and tools available in the market that can help automate the production of disbursement accounts. These programs utilize data from various sources such as vessel logs, invoices, and other financial records to calculate and generate accurate disbursement accounts.

One such tool is Base.io, which is specifically tailored for the shipping industry. It can easily integrate with your existing systems and streamline the process of producing disbursement accounts. Plus, it has a user-friendly interface among other benefits. 

Base saves a significant amount of time and effort compared to manual calculations. With automation, data entry errors are also reduced, resulting in more accurate and reliable disbursement accounts. Another advantage is that it allows for better transparency and visibility into the expenses incurred during a voyage. Automated disbursement accounts provide detailed breakdowns of expenses, making it easier to track and analyze spending patterns. This information can be useful in identifying cost-saving opportunities or potential areas for improvement in operational efficiency.

PDA and FDA in Shipping: in Conclusion

In summary, PDA and FDA may seem like complex concepts at first, but they ultimately play a critical role in keeping the maritime industry running smoothly. With proper knowledge and tools, companies can navigate these processes with ease and reap the benefits of better cost control and efficiency. So next time you see those letters on your shipping documents, you’ll know exactly what they mean and why they matter

Using a system like Base.io can greatly streamline the PDA and FDA process, saving time and resources while also providing valuable insights into spending patterns. By taking advantage of technology and automation, shipping companies can stay ahead in a constantly evolving industry. If you are interested in learning more, visit our blog on finding a disbursement system or contact our sales team.

Frequently Asked Questions 

What does PDA stand for in shipping?

PDA stands for Proforma Disbursement Account, which is an estimate of port-related charges before a vessel’s arrival. This is used to calculate the final disbursement account.

What is a disbursement account in shipping?

A disbursement account is a financial account used to manage the costs associated with a ship’s port call including port services and other expenses.

How accurate should disbursement accounts be?

The industry standard for accuracy for disbursement accounts is +/- 10%. Disbursement accounts should be as accurate as possible to prevent any discrepancies or unexpected charges during a port call. It is recommended for ship owners/operators and charterers to review and agree upon the estimated costs in the PDA before the vessel’s arrival. Any changes or discrepancies should be addressed and resolved promptly to avoid delays or financial disputes. Additionally, it is important for both parties to keep track of actual costs incurred during the port call to ensure proper billing and payment after completion of services.

How long should it take for a disbursement account to be produced?

Timing can vary, but efficiency and accuracy should be prioritized to meet operational demands. Generally, a disbursement account should be produced within 24-48 hours after the vessel’s departure from port. However, this timeline can be affected by various factors such as the complexity of services rendered and availability of required documents. It is crucial for all parties involved to communicate effectively and promptly during this process to avoid any delays or errors in producing the disbursement account.