The aviation accounting process relies heavily on the accurate representation of operational events on the ledger at the time they occur. Work orders are processed in real-time within the hangar environment, while inventory is processed across multiple locations and may not have been fully captured in the ledger in the correct format and in a timely manner. It creates inconsistent information between multiple locations.
Aviation ERP accounting provides real-time synchronization of work orders, inventory movement, and financial reporting for aviation parts traders and MRO businesses. As a result, this makes it easier for aviation companies to manage their day-to-day affairs.
How Accounting Loses Accuracy When Systems Don’t Move Together
Disconnection between operations and finance leads to a gradual decline in accounting accuracy. It simply means that a labor log is late, which would affect maintenance cost tracking.
Parts are issued into use and may not have a financial posting associated with them. Vendor repairs may be completed but not entered into the ledger until the invoice is received. Traditionally, teams reconcile data at the end of the month using spreadsheets and offline logs. Any gap in the accounting data just multiplies the negative impact of the missing information and shows up as a loss in revenue.
Where Does Financial Data Really Start in Aviation Operations
The place where financial activity actually begins in aviation is in the work order, rather than in the accounting module. In accounting for repair and overhaul, the accumulation of both labor and material costs occurs before the actual billing takes place.
The moment that either a technician begins working or a part is issued, there is an associated cost that has been incurred. For example, outsourced repairs create liability for the company well before an invoice is received. If the execution of these events is not captured, then the accounting function only sees part of the truth.
The primary sources of costs include:
- Labor hours are charged to the individual tasks.
- Inventory (aviation parts) that are taken from stock and supplied to the job.
- Services that are received from an external vendor for repairs.
- Temporary asset exposures created by exchange transactions.
The delay in identifying and capturing these events through the system creates a lag in reporting financial information relative to the actual financial position.
The Importance of Inventory in Aviation
The accounting of aviation inventory is based on numerous criteria, such as serial numbers, condition codes, rotable classification, and certification status, all of which greatly impact the value of inventory.
Conversely, upon issuing the part to a work order, both the value of inventory and the amount of work-in-progress change simultaneously. Returning a rotatable core reverses the impact and closes the financial obligation.
With no synchronized postings, inventory records become detached from the general ledger.
Why Manual Reconciliation Becomes a Permanent Bottleneck
It’s true that manual reconciliation does not work in aviation due to the size and timing of all transactions being greater than what could be reconciled on a periodic basis. By the time accounting receives input, there is no longer a context in which to review that data, because parts have been moved from the warehouse or production area to the aircraft. Therefore, submitting corrections involves many emails, explanations, and entries that will slow down closing cycles and create distorted maintenance expense reporting.
Key failure points include:
- Duplicate entries are made in two or more systems by employees.
- No clear links between the part used and the job that was completed.
- Vendors are being late in posting their costs associated with parts or other services.
- Unclear accountability for determining what corrections need to be made.
These are all examples of structural issues, not the result of a lack of process discipline.
How Financial Reports Improve When Operations Drive the Numbers
When financial reporting in aviation is created from operational data without any manual intervention, the financial reports will provide consistency and validity. The work in progress represents an accurate picture of where the job stands. The inventory valuation is not reliant on an estimate of how much of an item should remain in stock, but on the physical stock available in the warehouse.
Margins can be reviewed for a specific job without manual calculations. The focus of audits will be on the controls surrounding the information rather than trying to make corrections to it. This improves aviation audit readiness.
Reporting improvements are due to:
- Data is captured only once at the point of execution.
- No timing differences exist in financial data.
- Data is traceable from the beginning to the end of the process.
The finance team will receive clarity and will not spend their time correcting the data as a result of having accurate data in the first place.
The Controls That Keep Accounting Aligned With Reality
The enforcement of control is an integral part of synchronization. Only when control is in place will the enterprise systems be able to apply rules to prevent incomplete and incorrect transactions from flowing downstream, thereby enabling the aviation compliance reporting.
Effective controls are:
- Mandatory fields before posting.
- Permissions based on role.
- Automated validation checks.
- Preventing financial postings in the absence of dependencies.
These controls provide an assurance of accuracy without creating additional work.
Where Power Aero Suites Fits in This Accounting Flow
Power Aero Suites is an intelligent cloud-based aviation ERP software (for parts traders and MROs) available on a fixed, affordable subscription cost. Developed by aviation experts with decades of experience, hosted on AWS technology, this ERP integrates work orders, inventory, and accounting into one fully integrated solution.
When operational actions are performed, the financial records are updated in real time, enabling maintenance and repair activities to properly manage aircraft parts costs. The system enforces the existence of dependencies to ensure that the accounting information reflects the actual activity that occurred within the physical environment, rather than the activity that was recorded at a later date.
Final Thoughts
The only way for aviation accounting to grow is for operations to integrate with finance. The real-time synchronization of enterprise resource planning systems will eliminate timing gaps, increase the efficiency of reconciliation, and increase the level of confidence in financial reports. By sharing the same data and timing for work orders, inventory, and accounting, the accounting department will become a control function and return value to the organization.
Book a demo to see how Power Aero Suites supports simplified aviation parts traders and MRO operations.
