Integrating Distribution & Approvals with Intelligent Finance Workflow05/29/2019
Revenue is a complicated and process-heavy, yet important part of upstream oil and gas accounting. To ensure proper revenue management, you’ll need time and resources. Here’s a list of items that can go into just one month of managing revenue management:
- Correcting decks
- Booking all new sales and adjustments
- Owner calls
- Whether through check stub or accrual, making sure they reconcile
- Running all prior period adjustments (PPAs)
- Getting reversed rebooks completed
- Making sure there are no tax changes or new state laws to follow
- Simply having the time to get everything done by the end of the month without killing yourself!
We created this infographic to capture a before and after snapshot of how an automated workflow tool can help overcome challenges when manually managing revenue.
Revenue Distribution Before
A snapshot of running revenue without having automated workflow tools and having to process manually.
- Printing checks
- Physically mailing checks
- Receiving checks in the mail
- Pulling them out of envelopes
- Typing them into the system
Not only is this reliant on paper, but also manual work. You’re physically storing all paperwork and it’s difficult to share when requested by another person or department.
Just imagine, you have a deck change which goes to one person in the company who puts it on their desktop, then forgets to put it on a shared drive and/or email it to another colleague who also needs the information.
Heavy Reliance on Spreadsheets
Let’s face it, as accountants we LOVE spreadsheets. Everything goes into spreadsheets, including all reconciliation data, which opens the issue of possible input errors. Spreadsheets are difficult to use to analyze data. You can build charts from the data, but even that is just a snapshot of the information in the spreadsheet at that time.
Data can start to get overwhelming in a spreadsheet. One spreadsheet may only be able to show one well or area – not able to show the mass of data for the entire organizations. It can become a massive spreadsheet, making it difficult to update and impossible to audit.
There’s a lack of governance. You can put basic security on a spreadsheet, but you can't protect the data.
Approvals by “Sneakernet”
A big problem with Sneakernet is that it slows down the sharing of information and lacks flexibility. Many revenue departments still get approvals by Sneakernet. They input all the received monies for the month, print a batch report, walk it over to the supervisor, drop it off or maybe sit in their office, and wait for them to look it over.
We’ve reviewed some of the aspects to manually managing revenue, now let’s look at some of the risks.
Wasted Time & Lost Resources
Manually running revenue is time consuming and can possibly lead to penalty costs if something slips. A possible scenario would be walking a report to a supervisor, who also has PPAs from multiple coworkers to review and a batch report to run. But, before they can do that, they must do their own PPAs. The next thing you know there’s a stack of a hundred papers and your report is on the bottom – leading to delays that are frustrating for both you and your supervisor. The supervisor becomes buried with too much to do and feels overwhelmed.
This isn’t true for just revenue but also joint interest billing (JIB) and anything on a deadline. All creating bottlenecks.
This infographic shows that approximately 88% of all spreadsheets have errors. Add that to trying to do some of the more complex functionality, like:
- Typing in the wrong search criteria
- Using the wrong V-lookup
- Changing a formula and not changing it somewhere else
- Breaking links and then trying to figure out where they’re broken
If you think about it, you can only trust about 12% of the spreadsheets you’re working from.
Mistrust is not only internal, it extends to your customers who receive royalty payments. There are royalty owners who rely on their royalty checks for everyday expenses. Since they live off these royalties, they don’t understand well fluctuations and are very aware of changes in payouts. If they see a change, they call and ask why this month’s check was lower than last month’s check.
This interruption costs time because someone must take the time to figure out the difference and if there was perhaps a payment issue. It's important to keep that trust with customers so that there are fewer owner calls and more time to do deadline-driven work.
Once payments have been made and are out the door, accounting runs a system-wide balance report. If there’s a discrepancy, there’s no immediate understanding as to why it happened. Sometimes it's because transactions got caught. Sometimes it’s a system issue. Other times it's that ownerships aren’t right across the systems. Maybe a report didn't get signed off on, so it wasn't put in final status, which means it wasn’t run.
Missing the chance to have a formal review and sign off or run the proper reports can create more work after the processes have run. Staying on time and allowing capacity for this review is extremely important to precise recordkeeping and efficient use of time.
Revenue Distribution with Workflow
Now let’s take a look at the benefits of automated workflows and how they reduce back office operating expenses.
Automation & Visibility
When using a workflow tool, processes can be put on a schedule and reports can be automatically distributed. You’re no longer in a line outside the supervisor’s office, waiting to get approvals. There’s visibility to show when transactions are ready and that all steps have been completed to do final distribution. An automated workflow can flag transactions that aren’t ready to get the attention they need. Actions are shown in real-time, not what happened two weeks ago that might have been missed or overlooked. The automation ensures that the reports are going where they need to go, when they're ready – instead of having a full inbox or a stack of papers.
Errors are also minimized. Supervisors are no longer buried in paperwork and approvals, they’re on top of items and are no longer the bottlenecks.
Single Electronic Repository
With a single repository, everything is one place. From ownership changes to approved reports and the numbers that were run – it’s all in one place and easy to find.
If, at the end of the month, the numbers are off, then it's easy to find supporting information.
Mobility allows business to continue even when people are outside the office. A supervisor can still go through approvals without having to be in the office.
Streamlining Approvals Is Essential to Financial Efficiency & Control in Oil & Gas Accounting
Oil and gas accounting functions are extremely reliant on approvals. Not just revenue or JIB, approvals are part of everything. Everybody relies on approvals. This infographic highlights the challenges before having a workflow that automates approvals, and the time savings and efficiencies when you do have one in place.
A workflow tool adds time and financial efficiency and control to an upstream oil and gas accounting department. You no longer need to track down approvals or run from office to office to try to find a supervisor. Gone are the days of sending an email to ask for the status of the approval.
So, let's get rid of the scanning and emailing, and let's automate!
About The Author
Brandi Greek, Product Manager of P2 Workflow, joined the P2 Energy Solutions team three years ago, after spending numerous years as an accountant in the oil and gas industry. She devotes her days at P2 to devising ways to make the day-to-day lives of our customers easier with automated workflows. While Brandi is a Denver native, her love of travel has led her to spending some time living in South Korea and New Orleans – but will always call Denver home.