The most basic success metric for any kind of business. Stakeholders often focus on profits to measure success, but for recession-tempered oil and gas service companies, cash flow is king. In volatile commodity markets, effective survival strategies are built around sustaining working capital — the lifeblood that keeps labour, fuel and material on site.
Analysts and consultants are quick to identify accounts receivables as an uncomplicated source of additional cash. Accountants will talk about reducing Days Sales Outstanding (DSO) to shorten the billing cycle. Simply reduce terms and have clients pay their bills faster. Easy as pie, right?
Perhaps for some industries, but this advice doesn’t translate in O&G for two reasons. First, 90 day terms have been the standard for decades in the industry. The odds of 30 day terms being new standard practice are somewhere in the realm of the New York Jets winning the Superbowl.
Second, as a metric, DSO misses the most critical aspect of service company operation. The clock for DSO starts the day that the invoice is created. If you have a wireline, casing or any other oil and gas service company, you know the day an invoice is complete feels like a touchdown. The hard part is over. You can finally stop the exhausting hunt for tickets which can involve:
- waiting for crews to come back from near the 60th parallel
- sifting through coffee-stained, grease-smeared tickets
- waiting for trucking companies to mail or fax (guaranteed illegible) haul slips
- disputing charges with subs
While the madness looks different for everyone, the crux of the issue is the same: paper tickets cause delays and errors in the billing process. Making sense of the tickets and pursuing missing paperwork causes administration costs to soar. Inputting data from paper tickets into accounting software is redundant, time consuming and prone to errors.
The worst part? Your 90-day receivables countdown hasn’t even started. The job is done, payroll has been run half a dozen times and you have already paid the associated fuel and material bills. The strain on cash flow is significant.
The Missing Metric
What your business needs is a way to reduce Days to Invoice (DTI) — the time it takes to create a bill for the client.
What if invoices were living documents that were being updated with numbers from sites every day? What kind of impact could that have on your cash flow if you could bill as contracts were completed? Payments would arrive sooner, interest expenses go down and you’re earning interest instead. There’s cash for capital investments. Breathing room.
So, how can wrangling tickets be faster? You have likely streamlined the process as much as possible already. Well, as reluctant as the industry has been to embrace paperless technology, it holds the key to monumental shift-change of the long-standing, error-riddled paper process.
Aimsio has created one such solution: cloud-based software that integrates into daily field operations without disrupting how crews work. Once implemented, our software requires minimal training from our team and your crews are quickly using a phone or tablet to complete digital replicas of your paper tickets. Digital tickets that can be sent from site to the office everyday. Legible, accurate information from the field that integrates into many ERP and accounting software systems — this means redundant data entry is eliminated and admin costs can be reduced.
Our software goes beyond paperless field ticketing. Once the data is captured on location, creating an invoice is an easy drag-and-drop process. Additionally, all of the backup associated with the invoice can be attached. Then, with your crews still on site, you can email a complete and accurate bill to your client. The 90 day countdown starts now.
Aimsio understands that the key to managing your cash flow isn’t going to be found in negotiating receivable terms with E&P companies or other service providers. You need a way to generate accurate invoices faster — we have the tools that unlock the speed and reach of the internet for you. Take a look at how our software can make your field operations more efficient. Click the link below.