Pandemic forces oil and gas accountants to overhaul outdated financial systems
Many businesses have faced enormous challenges as they struggle to cope with COVID-19. The oil and gas industry has been particularly hard hit, at a time when operators are already dealing with a sharp decline in demand, an oversupply of foreign oil and plummeting prices.
The shutdown in March forced O&G firms to confront the inefficiencies of their financial processes. Though most have kept their production and processing technology up to date, they haven’t modernized their accounting and back-office operations, continuing to rely on paper trails and in-person interactions.
Those antiquated practices became obvious serious problems when businesses transitioned to a primarily remote workforce almost overnight. Finance teams and accounting firms were forced to cobble together ways to re-engineer the office at home.
For many of them, the situation quickly became critical. A late April survey by WolfePak Software paints a stark picture of the operational challenges and top priorities of finance and accounting professionals.
Remote work is the new normal
Focused on questions about their immediate needs, challenges, and insights about remote working, 236 oil and gas executives participated. More than 30 percent of respondents said their entire workforce is home-based. Another 42 percent reported at least half their staff is working remotely. Only 27 percent of participants are continuing business as usual in the office, as all their employees are deemed essential. One noteworthy finding: 75 percent of the respondents said they are now working remotely.
Paper-based processes cripple financial operations
The survey data and responses outlined how tough day-to-day accounting tasks became without a physical office presence:
- 55 percent of the respondents found paying invoices and writing checks to be a serious challenge;
- 24 percent cited difficulty in distributing revenue and statements;
- 15 percent said generating departmental and financial reports is an issue;
- 7 percent identified cash flow analysis as most difficult to obtain;
- 6 percent reported processing payroll as a primary problem.
Operational issues have arisen as well. More than three out of four respondents struggled to access essential information on service tickets, run tickets, and invoices. And 16 percent say access to accurate, current production data is a struggle. There are also problems linked to the paper trail. It’s challenging to process hard-copy checks delivered to an office; respond to paperwork from other divisions, government agencies and outside operators; scan documents into company systems; and access data physically stored onsite in file rooms. Because O&G companies typically deal with many stakeholders in their oil wells, including owners and partners, the complexity grows when more and more people have to touch a document physically.
Remote work headaches
Those aren’t the only hurdles in a work-at-home world. Technology challenges include the limited internet speeds and weaker security of home Wi-Fi and the technical glitches encountered by staffers using many different types of hardware and software.
On the human side of the equation, collaboration and communication are more complicated, and children and homeschooling have been big distractions. This is only exacerbated today, with many parents still working at home — and with kids.
Seeking solutions: automation and digitization
The difficulties are apparent, and they might not go away any time soon. Yet efficiency is vital when the bottom line is under pressure, and every dollar counts. Companies recognize the need for immediate access to accurate production data to revise strategies and protect profitability. At the same time, top management, lenders, partners, suppliers and customers demand more reporting and up-to-date financial data.
O&G companies are now making automation a top priority in going digital. They need their accounting firms to support them in this effort, or they won’t survive this depressed oil market. The effort won’t be a quick fix, but it’s a necessary step as they move away from legacy infrastructure and implement cloud and mobile-first strategies.
When documents are digitized, employees working from home can log into the system from any computer with an internet connection and access the information they need to do their jobs. By automating the collection of production data, operators can monitor more wells with fewer people, reduce operating expenses and boost margins. By ensuring seamless data transfer from the field, a company can use this information daily to ensure they are focusing on the right metrics and investing where they should.
Access to vital information in real-time — or at least, “real enough time” — enables operators to make better, more informed decisions, faster.
To implement this new digital reality, companies need to commit to both open systems and technology to communicate with each other digitally. It’s vital to have systems that are interoperable and can talk to each other. If you have transactions in two different parts of your business, the technology used to create these must enable back and forth communication and carry through the critical details so all departments can understand the full context of the data.
Take the seemingly simple process of paying property owners via check or electronic payments. While this may seem to be a trivial task, it is a complex process requiring coordination between the Land, Division Order and Accounting departments. If there are different systems for each department, and they do not communicate well, the business could lose essential details for these transactions, complicating internal and compliance reporting. Closed systems that are incompatible or lack native integration will stop workflows right in their tracks, causing even more complexities and introducing new problems.
Such measures are likely to become standard operating procedure as O&G companies strive to remain relevant and profitable. By embracing new technologies, these firms will be able to weather this storm and be positioned for growth when the market recovers.