1 Simple Thing That Oilfield Services Companies Can Do To Increase Profitability
Oilfield Services Companies have been hit with a one/two punch with the downturn in the oil and gas industry and Covid.
As oilfield services companies come out of this, they are going to have to look at ways to gain incremental efficiencies to increase their profitability.
The video below shows an example how energy services companies can look at streamlining their accounts receivable process. With Enter My Invoices automated process, firms can see a reduction in the time it takes to submit invoices through e-invoicing portals like Cortex, OpenInvoice and Ariba. In addition, a bigger cost savings is the reduction in carrying costs on getting invoices out the door faster.
Here is a transcript of the video:
Hi, this is Chris Hamilton with Enter My Invoice and in today's presentation we're going to show you one simple thing that Oilfield Services companies can do to increase their profitability. So we're going to focus on the accounts receivable side of things. So the way the market is right now with COVID and also with the downturn in the oil and gas industry, oilfield services companies need to figure out ways to streamline their operations. Some of the stuff that you could do is take a look at small incremental efficiencies that can have a huge impact on your profitability. By doing small little things that have 1% here, 2% here, 5% here, those all add up and can have a tremendous impact on your profitability. One thing we are going to focus on today is looking at the accounts receivable side of your business. The problem that exists in the oilfield services industry or one of the problems that exists in the energy services industry is that oil and gas companies force oilfield services companies or energy services companies to put their invoices through an E invoicing portal. So that'll be e-invoicing portals like Cortex, Ariba, OpenInvoice OpenTicket and others out there as well. One of the things that e-invoicing portals cause is your accounts receivable team have to go in and create an invoice in your accounting system, and then have to take the exact same information and oftentimes more and put it into these e-invoicing portals. The other thing that causes a problem is it typically 1 in every 80 keystrokes (when you're doing alphanumeric typing) is going to be an error. So if there's an error in your invoice or any way that you put your invoice in, then the problem is, if it doesn't match up with what the oil and gas company has, then it will kick it back and that further delays the payments. Cortex had an example, a couple years back that I saw that I believe it's six minutes per invoice to put in the invoices into their system. I'm also going to make an assumption it's probably about six minutes to create an invoice so you've created the invoice for six minutes and you're also putting an invoice in to the e-invoicing portal for six minutes. This means that if you're creating invoices, or if you're creating, putting stuff into the invoicing portal, you can do 10 per hour or five invoices and then five going into the invoicing portal. That means that you can do 40 invoices a day with an average accounts receivable clerk. This is where we start finding some incremental wins that can have a tremendous impact by looking at automating E-invoicing submissions, like the one that Enter My Invoice has. Where it takes six minutes to enter an invoice, leveraging a system like ours will allow you to get your invoices done in upwards of 30 seconds or less, which means now you can do on the invoicing side 120 invoices per hour or greater, which is up to 24 times faster than the normal way of doing stuff. When you automate, you can get 73 invoices per day. So where it was before, if you were doing the invoicing and the E invoicing side, you could process 40 invoices a day. If you automate this, typically with a scenario you can get this up to about 73 invoices a day or 33 more invoices, which is a 45% increase in the amount of invoices you get out the door so that basically doubles your AR staffs effectiveness. Let's take a look at what the impact is on an organization. The average AR clerk makes $40,000 a year. If we can get 33 more invoices out per day, times 20 days per month, times 12 months per year, that means that you can increase the efficiency by 7920 invoices. Now, if you take that AR clerks salary at $40,000 per year and divide it by the amount of invoices that you can get out the door faster, that means it's a $5.05 saving per invoice. Once again, this comes back to small little incremental shifts in the way you're doing stuff having a positive impact on your business. Another thing to look at is the carrying costs savings that you can get. In the same information that Cortex put out, they said that their average invoice going into their system was around $10,000 per invoice, I'm going to make an assumption that there's an 8% carrying cost on capital. And if we can actually double your staffs effectiveness, then basically we're looking at about a 14 day time savings per month for getting invoices out the door. Once you start taking a look at all this information added up together, 14 days at 8% on a $10,000 invoice, what you're looking at is about $30.69 cents per invoice in reduction in carrying costs. That also works out to basically $234,065 on that increase in efficiency in getting invoices into systems. With just those two areas of savings, you're going to get over a quarter million dollars a year in savings, or $35.74 cents per invoice. This roughly works out to almost $23,000 per month savings. Based on our current pricing structure, this would be about a 3800% return on investment. How can Enter My Invoice help? Well, obviously we do have an E invoicing integration into different invoicing portals. We do have a ticketing app which will allow you to get your tickets in from the field faster. And we can also do accounting system integration so that you can tie your systems in together and streamline that whole process.
To find our how you can automate your field ticketing process and automate your invoice entry into Cortex, OpenInvoice and other e-invoicing portals, contact Enter My Invoice at 1-800-375-0967 or firstname.lastname@example.org