In the dynamic and demanding realm of the oil and gas sector, keeping spend under control and increasing capital efficiency continue to stand as pivotal challenges. Most E&P companies address these problems by trying to reign in spend, increase process efficiency and improve compliance. But these efforts often fall on the shoulders of operations and accounts payable personnel, who might not have the right tools (or time) to focus on these factors apart from their usual responsibilities. While automation, along with implementing management by exception, doesn’t solve all these problems, it does save significant time for teams, help you manage spend and cut down on spend leakage. One of the biggest areas where automation can help is specifically in oilfield ticketing and invoicing.
If you’ve worked in operations, AP or supply chain you probably know that a lot of time-consuming paperwork and manual validation comes before invoices are even approved. Considering that around 80% of spend for upstream E&P companies comes from services like water hauling, roustabouts and the like – activities that can generate hundreds or even thousands of tickets per month – this process can create major bottlenecks and seriously affects operational efficiency.
So, let’s focus on how automation is essential to getting things right if you want to tighten up your spend and improve capital efficiency, starting with tickets.
Only Focus on the Exceptions and Catch Mistakes Early
Enter manage by exception.
Manage by exception (MBE) not only enhances efficiency and reduces manual errors, but also significantly cuts down processing times. But what exactly does it involve? Basically, MBE significantly cuts down on manual work by using machine learning and automation to handle routine decisions and spotlight exceptions that deviate from the norm.
By marrying machine learning with automation, we’re able to create a digitalized workflow that significantly reduces the time operations and AP personnel spend reviewing, coding and approving tickets and invoices. For best results, this technology is deployed for all the actions and processes leading up to the creation of invoices. This way, instead of waiting until you’ve already been invoiced to find errors, all the errors and inconsistencies have been worked out beforehand – ensuring that you have better compliance, financial tracking and an accurate view of your operational spend. In oil and gas, this often means that companies need to focus on increasing their visibility into activities that account for most of their spend, but which also generate a lot of hard-to-manage information – i.e., ticketing for repetitive high-volume services such as water hauling, chemical applications and roustabout work.
OpenTicket®: Leveraging Digital Tickets and Management by Exception
The first prerequisite for applying MBE to ticketing is to fully transition from paper to digital tickets. Apart from ensuring that information is more accurate and accessible, digital tickets also allow you to integrate with vendor pricing agreements and gain advanced visibility into spend. From there, software can automatically flag tickets that don’t comply with your price books, purchase orders and associated AFEs and cost centers.
Then, when you receive tickets, you can easily use an online dashboard to instantly see completed tickets and filter for non-compliant tickets. Once anomalies are identified, reviewers can contact the vendor directly in-app or approve the ticket if everything looks in order. Using our OpenTicket solution, you can easily do all the above in addition to checking time stamped GPS routes on work performed at unsupervised locations.
Not only does identifying anomalies at this stage save a large chunk of time for operations staff that often end up checking invoices against tickets later on, but it also allows you to catch potential sources of overspend before you get invoiced. Once your ticket approvals workflow is under control, you can better manage your spend and ensure that suppliers are up to snuff moving forward. With further automation of the source-to-pay cycle using OpenInvoice®, the invoices received from your vendors can then be automatically approved according to pre-set acceptance criteria.
Another innovation that helps you combat overspend is “smart coding,” which uses machine learning to anticipate how you code certain line items connected to AFEs and cost centers and applies those patterns to new tickets and invoices.
Our OpenTicket solution incorporates these innovations by using digital tickets that are automatically coded based on previous coding patterns and existing parameters. Reviewers have a chance to confirm the coding is correct before approving the invoice.
So, by the time tickets are approved and returned to the supplier for invoicing on their end, they’ve already been checked for compliance and have the right coding built in, right from the start. Let’s move on to what happens when these tickets are flipped into digital invoices.
If these gaps affect parts of the processing cycle, like compliance or coding, it could have significant impacts on a company’s bottom line. In fact, McKinsey found that companies lose 3-4% of their annual budgets due spend leakage on an annual basis, while they stand to save about 3.5% of their budgets just by improving their compliance and control processes.[1]
With full automation, instead of receiving invoices via PDFs and emails, digital invoices are generated and automatically validated against pricing agreements, and automatically assigned GL codes or cost center assignments. The main way that MBE can be applied to invoice processing is through setting acceptance criteria based on a variety of factors – for example: scope, quantity or price based on contract agreements with suppliers – and then having the software notify you if an invoice doesn’t match these criteria. Otherwise, the software will work on its own in the background, automatically approving invoices until it finds something that needs human review.
Taking things a step further, you can also set things up so that invoices that don’t meet your acceptance criteria are automatically routed to a higher authority, like a supervisor, for review. The knock-on effects of automatic approvals and routing are significant for operational efficiency.
Through these process improvements you can significantly reduce manual work and move toward “no-touch” invoicing, which significantly reduces workload, increases compliance and improves relationships with suppliers through “paying on terms.”
Interested in learning more about how managing by exception can save your bottom line and keep operations personnel focused on mission-critical tasks like optimizing production? Fill out the form below.
[1] McKinsey. 2021. A Roadmap for Digitizing Source-to-Pay. Available at: A road map for digitizing source-to-pay | McKinsey
