How to Improve Back-Office Efficiency to Increase Profitability: Part One
Innovation is a big word. By big, I mean that it conveys a picture of groundbreaking change. Most of the time, it is the small ideas that solve an ongoing problem that positively impact your business the most.
Technology is a proven way for energy companies to become more efficient. When it comes to optimizing processes, technology and automation, there are so many different options it can be overwhelming to figure out where to start.
To help you find new ideas on increasing efficiency and improving cost management, I sat down with industry experts on back-office digitalization – Dave Savelle, General Manager of Field Ticket Operations; Michael Ross, our OpenInvoice Consulting and Training Manager; and Jeff White, VP of Operations. In this interview, we discussed small changes that make a big difference, ultimately improving your bottom line. We divided the conversation into three articles:
- How to Get Started Uncovering Opportunities and Specific Areas of Opportunity
- Choosing Metrics To Improve Workflow Efficiency and Measure Progress
- Planning for the Future: How to Execute on Digitalization Initiatives the Right Way
Understand Your Processes
[Susie] When a company wants to uncover new opportunities for efficiency or cost savings, what’s the fundamental thing that they must do to get started?
[Dave] It’s important for any organization going through the digitalization process to understand your processes and how they vary within your organization. We launched OpenInvoice in 2000 and made a lot of assumptions back then. One was that invoicing is a straightforward process. We quickly found out that’s not accurate at all. And it is remarkable how different workflow processes can be from one operator to the next. If you’re in an organization that’s gone through some pretty complex changes, such as acquisitions or reorganizations, you’ll find that even the individual processes within the company might change depending on what business unit they’re in or what the nature of the operation is.
With OpenTicket, our digital ticketing solution within OpenInvoice, we learned that, even more so than the invoice process, the field ticketing process can vary greatly between different parts of an organization. One of our clients found that different areas of the company had different data requirements for submission and different resolution processes. So, a supplier if a supplier sent a ticket to drilling and completions, they got a very different experience than if they send it to facilities. This led to an inordinate amount of wasted time, effort and a lot of confusion.
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Find Opportunities to Increase Process Efficiency
[Susie] Michael, you work with OpenInvoice customers to evaluate their current processes and workflows and create strategic plans to improve them. What advice can you share on how companies can find areas to improve efficiency?
[Michael] Once you understand your processes and understand the variations across the different business units, look for opportunities to standardize and make things consistent so that your suppliers can follow a uniform process across your entire company.
Find duplicate actions. If the same person is doing rate validation and validation to the ticket, automate that by bringing in technology and finding ways to link the invoices and programmatically resolve the issue.
You also need to make sure that your teams understand the changes, know how to talk to your suppliers and how to use the new software. One customer I worked with spent a lot of time and effort on digitizing their rate sheets, bringing electronic rate validation and using software that generated an alert to show the rate was compliant with the terms that they negotiated. But they forgot to tell their invoice approvers what that alert meant. Their approvers were still doing all the manual effort to validate when there was an alert flag telling them that the supplier was compliant.
[Susie] When we talk about automation, we’re essentially saying that software will complete an action without an AP person or someone in operations having to touch the invoice. This provides significant time savings, but it raises a concern of loss of control. Can you speak about how we avoid that?
[Jeff] All invoices go through the same steps and touches during the approval process. Every invoice, regardless of dollar amount, must be validated, coded and routed for approval.
Steps Required To Approve An Invoice
Most invoices in the industry are low-value. We process about 20 million invoice transactions through OpenInvoice over $150 billion in spend across 400 different operating companies. 55% of these invoices processed are less than $1,000, 72% are under $5,000 and 82% are under $10,000. If you automate some of those processes, your team can focus on the higher value invoices.
Invoices Processed in OpenInvoice in 2020 By Dollar Amount
When we talk about automation and how to build controls, we suggest you start off small, like auto-approvals on invoices less than $1,000. Then, review those on a regular basis just to ensure everything did go through correctly. Once you feel confident with the automation, you can increase the dollar amount that that is on each one of those invoices.
[Susie] What are different ways that customers are maintaining control while benefiting from automation?
[Michael] There are different types of automation, depending on the type of supplier. If you look at your different types of invoices, there are three main types.
- Overhead utilities are consistent and recurring, so they typically are automatically coded to the same accounts in the chart of accounts. There is a defined threshold in the system, set around what your expected amount should be each month, and approval is automatic if the total is within that threshold. Exceptions can be dealt with as they get routed.
- Pre-approved spend or purchase orders spend approval occurs up front, then you incorporate receipts for goods when products are delivered. You can generate a three-way match between your invoice, the purchase order and the goods receipt. Again, automate coding, scope, validation and enforcement, but when that invoice comes in, if you’ve got a three-way match, it adheres to the receipt of goods and the terms of the purchase order. It’s within what was pre-approved. There’s no need to review it.
- LOE/Capex typically has negotiated price agreements. Digital field tickets outline scope and quantity. There are opportunities here to automate rate compliance enforcement by auto disputing for noncompliance. There are opportunities to review and automatically code. If the product and service from this supplier is the same each time, build that mapping into the system and reduce that data entry component for your team.
If the invoice is being sent to the same person that approved the ticket, why are you having them review the same transaction twice, once on the ticket, once on the invoice? If everything matches and it’s within their pre-approved or predefined dollar limits, you can set up a system to programmatically apply the controls and change the controls based on specific suppliers and specific scenarios.
[Susie] Can you talk about the results that customers are seeing with touchless invoicing?
[Michael] For some of our customers, 40 to 50% of invoices are touchless because they’re using these different controls across the different types of invoices. The beauty of this is once you get the program and rules in place, every time you add a supplier to PriceBook, the suppliers are eligible for the automated rules that are already in place. So, the operators using touchless invoicing are at 50% approval automation, but as this continues to grow they’re seeing even greater automation with their suppliers.
Are you interested in finding new ways to leverage your OpenInvoice solutions, data and processes, but aren’t sure where to start? The Enverus Professional Services team can help. Schedule a complimentary business review with Enverus experts.
Fill out the form to schedule a free business review with the Enverus Professional Services team today.
Jeff White, VP of Operations
Jeff joined Enverus in 2006 as a senior project manager, earning roles with increasing responsibility, culminating in his appointment to VP of Operations in 2019. He is responsible for the leadership and direction of several departments including Project Implementations, Technical Integrations, Supplier Onboarding, Client Advisory Services and Professional Services. With more than 20 years of oil and gas accounting and procurement experience, Jeff has worked in Joint Interest Billing, as a financial analyst in global supply chain management, and as a senior accountant and international liaison.
Michael Ross, Senior Manager, Training and Consultation
Michael has been in the software and technology industry for 23 years. He joined the OpenInvoice team in 2010 as a senior product manager initially focused on workflow automation. Leveraging his prior experience as an ERP implementation consultant at IBM, Michael is now the Training and Consulting team leader responsible for helping clients maximize the value of their OpenInvoice investments.
Dave Savelle, General Manager, Field Ticket Operations
Dave is a 33-year veteran of the oil and gas technology industry. He has held a number of roles in technology development and operations, including support, sales management, marketing, and development. In 2000, Dave left Halliburton and co-founded Digital Oilfield, running U.S. operations from its inception, and was on hand for the first deployments of OpenInvoice.
