Behind the Scenes

Efficient field operations improve profits and reduce waste. But what about efficient back office operations? Are you doing all you can to streamline your back office financial processes? Have you optimized your invoicing, accounting and supply management systems to maximize profits? Too often, companies are so focused on using new techniques and technologies to improve field operations that they neglect back office automation strategies that can translate into real savings. Let’s consider some common back office processes by way of example.

Paper processes cost money. Consider how much time and labor is required to manually enter invoices, gas plant statements, run tickets, joint interest billing and other financial paperwork essential to operations. Not only does manual data entry slow down operations and impede cash flow, it also is prone to errors, which lead to additional cost and delays for auditing and corrections.

Automating something as simple as invoicing can generate tremendous savings. Consider that if you are relying on manual data entry and an employee earning $55,000 annually can input 400 invoices over three days. That would mean the cost of creating those invoices would average $228 per day, $684 total for 400 invoices, or $1.71 added to the cost of each invoice. Then you have to factor in additional time and costs for error correction.

Procure-to-pay solutions can eliminate overhead costs and delays. Consider that paper invoices cost, on average, $7.99 each to process. By automating processing using imaging and workflow technology, the cost to process an invoice drops to $5.41. When you add optical character recognition (OCR) technology to convert paper documents into machine-readable data that can be automatically mapped to ERP business processes, the cost per invoice drops to $4.39. Eliminating paper altogether and adopting e-invoicing reduces invoice processing to $3.13 each, nearly one-third the cost of paper invoices.

When you consider the savings from paperless invoicing alone, consider how much more efficient and cost-effective your back office processes would be if the entire infrastructure was paperless. In today’s digital age, there is no reason to maintain paper processes.

Planning to Integrate 

To automate back office processes using procure-to-pay, the place to start is auditing your business workflow. What steps are required to process an invoice, generate a JIB, manage paper tickets, or deal with any routine paper process that has to do with accounts payables or receivables? For many energy companies, the steps are complex because they have to account for specific contract terms, shipping, taxes and a host of variables. By mapping the workflow for each process, you can automate each step and eliminate the delays of manual data entry.

Once you have identified the specific steps in the workflow, you can determine what ERP and procure-to-pay solutions are best suited to your business model. Bear in mind that the more closely you can integrate operations and financial systems, the more efficient your operation and the greater your savings.

Rather than worrying about automating different aspects of the back office by cobbling together various point solutions, it’s best to shop for a single procure-to-pay vendor that can design a system that integrates with your current financial systems. Using a single resource simplifies deployment and management. The solution provider should be prepared to assess your workflow and create a custom design to automate your business processes.

The design should encompass all aspects of your accounts payables and receivables, including: 

    + Hierarchy and routing, including multiple departments and worksites with a process to allocate invoice ownership and establish routing rules;
    + Identifying invoice and coding requirements that map to the ERP system, including chart of accounts, cost objects, validation rules and supplier requirements;
    + User setup, including rules and permissions, approval authority settings and approval flow; and
    + Support for special situations such as advanced discounting, price books and payment terms.

As part of the conversion process, be sure to assess savings in operating costs and overhead and map those savings to the cost of deploying and end-to-end automated transaction process. Chances are you will be impressed by the ROI.

End-to-End Visibility 

What will improve your ROI further is looking beyond just automating common business operations.

Work with your vendors and suppliers to automate their business processes for electronic transactions. Even if you have integrated your accounting and ERP systems, if you have to scan and process incoming paper invoices, then it’s reducing efficiency. Work with providers to handle all transactions electronically. There are some procure-to-pay solutions that will offer this service to suppliers on your behalf.

An increasingly popular transaction model in the energy industry is the exchange model. Secure cloud computing has made it easier than ever to exchange secure transactions, and a third-party exchange can provide translation between ERP systems using standardized data sets. For example, a drilling supplier may be using a different ERP system than an oil company, so to exchange electronic invoices, they agree to use a common exchange that handles process translation for them. The third-party data exchange converts and maps data fields so the accounting systems can directly process transactions. The result is faster business processes without having to do manual conversion.

Once you have all your business operations integrated into a single ERP infrastructure, you can use the data to analyze business processes. Simple reporting can identify problems or delays in operations. Analytics can help reveal trends and patterns that give you deeper insight into operations, such as specific processes or vendors that cause delays. Once you have a way to analyze end-to-end data, you can create realistic performance benchmarks and identify key performance indicators.

An added bonus of creating an end-to-end electronic transaction is you have an audit trail. Not only can you identify any problems along the way, but also you have auditable transactions that you can present to demonstrate regulatory compliance, without having to dig through paper records.

Efficiency in the Field

To take back office efficiency even further, extend it to the field. Wireless devices are more powerful and more secure than ever, and they are ideal for handling transactions from a job site or remote location.

Many procure-to-pay solutions include mobile support for Android and iOS devices. The ability to route invoices and routine paperwork for approval via handheld devices shortens time-to-transaction even further. Equipping field managers with wireless apps integrated into the procure-to-pay system makes it possible to capture and share paperwork and invoices, as well as approve payments and route financial documents without having to be at your desk.

Mobile technology also allows managers to make decisions that are more informed by providing immediate access to invoice journals, contracts and other attachments. They can even set up alerts for various activities delivered right to their smartphone.

What to Look For

There are many moving parts to any office automation system and no two systems are seldom alike. So when shopping for a procure-to-pay vendor, you want to work with a company that understands your business, and can develop a customized system that meets your needs and integrates with your existing financial and transaction platforms. Here are some questions to ask when considering a solution provider:

    1. Do they understand energy, mining and exploration? The company should have expertise in the energy industry.
    2. Do they offer a complete solution? You want a platform, not point solutions. You don’t want to worry about integrating different systems, or paying someone else to integrate different vendor systems. There are too many variables and too many opportunities for system failure.
    3. Do they have customer references? You want an experienced provider. They should have recognized names in their customer portfolio, including customers who will talk to you about their experience. Awards they’ve received from industry groups and third parties also can be good indicators of their credentials.
    4. Do they have supplier references? Especially when working with a vendor that offers a data exchange as part of its platform, you want to make sure you are working with a company that has the right supplier relationships. 
    5. How good is their training and customer service? Working with a procure-to-pay solution provider is a partnership. Be sure they have the resources to train your staff and deliver technical support when you need it.

Operating efficiency relies on frictionless transactions. Removing paper from business processes is the first step. If you can automate all your transactions using an extensible platform that can integrate directly with your financial systems, then you are well on your way to new levels of efficiency and profitability.

Richard Slack is founder and CEO of Oildex, the leading cloud-based financial supply chain automation solution for the oil and gas industry. He has more than 30 years of experience developing and marketing technology products for the oil and gas industry. For more information, visit www.oildex.com.

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