IN TODAY’S COMPETITIVE oil and gas market, companies are operating under the extraordinary pressure of dwindling commodity prices. Fortunately, the time is ripe for companies to invest in digital, mobile, and advanced analytics to cut costs, maximize production, and find new areas of growth. According to Accenture Consulting’s 2015 Oil and Gas Digital and Technology Trends Survey, the majority of oil and gas professionals say their companies’ future plans include either the same or more investment in digital technology. Over the next few years, analysts expect to see increased investments in key areas, such as big data analytics and automation, to improve overall business efficiencies.
Selecting the right partners and platforms has never been more important. Investments in digital transformation should be made to help companies overcome specific challenges within the oil and gas sector.
AP AUTOMATION ENABLES COST SAVINGS AND IMPROVED EFFICIENCY
Today’s P2P suites not only integrate with legacy ERPs but also provide value-added functionality. E-procurement, catalog management, and paper invoice scanning have already replaced traditional accounts payable solutions. The next step in P2P includes adoption of a solution to automate the entire P2P process. Cloud solutions are favorable due to quicker implementation times, better supplier collaboration, and quicker access to innovations and improvements. Mobile functionality is also becoming a basic requirement as the workforce becomes more mobile. Today’s economy requires P2P stakeholders to quickly respond to industry demands.
Payables automation reduces inefficiencies by offering increased visibility and streamlined document workflow functionality. It reduces document processing times, risk of errors, and the amount of lost or duplicate information. With accounts payable working more efficiently, oil and gas companies can gain ground by capturing early pay discounts and reallocating AP staff to higher value work.
According to Andrew Bartolini, chief research officer of Ardent Partners, some of the best-in-class AP teams are saving up to 80% of their processing costs with technology such as automation. And with 3.6 times as many suppliers enabled on their AP platforms, they have enough transactional volume to optimize their network’s value.
THE NETWORK EFFECT WITH B2B NETWORKS
With a shift in the way trading partners communicate, interact, transact, and share information, oil and gas companies are transforming the way they do business. Companies are leveraging shared technology to drive greater efficiencies, standardize business processes, and extend the value of core P2P investments. Buyers and suppliers see the greatest value from transacting and communicating on a single platform. Transactional efficiencies are driven by the connectivity within a platform or network.
B2B networks facilitate collaboration and communication within supply chains. They also enhance visibility and increase a stakeholder’s ability to make better, faster, more informed decisions. A network allows you to “enable once and connect to many,” says Bartolini. It allows you to standardize processes and technology across different trading partner relationships. With the ability to analyze aggregate information, your network becomes smarter.
Studies show that 75% of organizations view networks as collectively beneficial. The network’s value grows with each new member. In the case of P2P, as more suppliers join the network, the opportunities and efficiencies continue to grow in value. For instance, if a supplier is already enabled on the network, your relationship is basically set up for electronic transactions.
Not all networks are created equal, but they can be critical enablers of AP priorities and strategies. The value of your network largely depends on connectivity to automated workflows. Automated workflows and centralized data allow everyone in the network to easily access and synchronize information with their back-office systems. Manual processes reduce opportunities for greater collaboration and communication within the network. As more companies automate their AP processes, everyone in the network can work more efficiently and realize greater cost savings.
A PAPERLESS PROCESS POWERS COMPLIANCE AND SIMPLIFIED AUDITS
Digital technology can be used to power compliance, but companies must first eliminate all paper processes. Any data that is not automatically captured by the ERP system has to be entered manually or maintained separately for auditing and compliance, which creates added risk. Paper processes are prone to errors and harder to manage and track, so your best strategy is to eliminate paper altogether and consolidate business processes using a fully automated system.
Centralizing financial records, for example, makes it easier to keep track of customized contracts, discounts, payments, purchase orders, and other transactions. The ERP system logs every step in the workflow for auditing. There is even customized ERP software specific to the oil and gas industry to manage transactions, such as three-way purchase order matching, royalty revenue detail, run tickets, joint interest billing statements (JIBs), and shared billing costs.
There are, undoubtedly, legacy systems and processes in your value chain that still rely on paper. Invoices, bills of materials, shipping manifests, field tickets, delivery receipts, and other paperwork are still being processed by hand. Manual data entry, for example, requires time and resources and is fraught with errors and risk of lost paperwork. Even processes where paper-based forms are scanned and distributed electronically to make them part of the ERP systems still have to be managed manually, as if they were paper.
INCREASED VISIBILITY AND ANALYTICS
Oil and gas technology greatly improves a company’s ability to analyze with its robust reporting and analytics tools. This includes system-generated reports that can be exported to a spreadsheet tool for analysis and integration into back-end systems. Along with processing efficiencies, an automated system can also track costs, giving oil and gas companies the ability to monitor efficiencies and adjust their workflow process as needed.
In addition, an online interface of AP activity allows for greater visibility and transparency. Dashboards allow users to navigate in-progress invoices, providing complete histories of the documents. Supervisors can track the status of individual invoices or approvers, reorganize and prioritize unapproved invoices, and access audit trails at any time. Users can create customized invoice management views to see different groupings of invoices for workload management and other role-based views.
Associating critical site and project level information soon after service completion allows engineers to review costs and budgets in real-time. Wireless and mobile technologies, such as web-accessible wireless sensors as well as digital document and payment applications, can send data directly to ERP systems, generating real-time information for financial and operational analytics. With more granular data and better analytics, key decision makers have an immediate in-depth understanding of committed costs and opportunities for profit optimization.
In 2015, energy and utility companies spent $800 million on big data analytics, says global management consulting firm, Bain & Company. Companies that optimally use these analytics are:
- two times more likely to have top-quartile financial performance
- five times more likely to make decisions “much faster” than competition
- three times more likely to execute decisions as intended
- two times more likely to use data very frequently when making decisions
Cost savings and efficiencies are important to companies in all industries, but oil and gas specialty solutions also offer secure and profitable networks, greater compliance, and easier audits, along with a powerful hub of data that will propel leading oil and gas companies through any economic storm.
To read the full article on Oil and Gas Financial Journal, click here.