Better Communications for Oil & Gas Accountants

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The Ultimate Guide to
Upstream Oil & Gas Accounting Software

Learn how the right system helps upstream oil and gas companies decrease operating expenses and drive operational efficiencies.

Download NowWhy Use an Oil & Gas-Specific Accounting SoftwareChallenges Faced by Upstream Oil & Gas AccountantsHow to Evaluate Your Oil & Gas Software Needs

Accounting Software Vs. Manual Accounting with Spreadsheets

What Features to Look for in Oil & Gas Accounting Software

Revenue Accounting

Table of Contents

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Challenges Faced by Upstream Oil & Gas Accountants

There are critical functions of oil and gas accounting that are often managed by different teams and each faces a unique set of challenges throughout their workday. The upstream oil and gas industry is fraught with complexities that can be confusing from an outside perspective, and oil and gas accounting is no different. We’ve provided a simple breakdown of the different facets of oil and gas accounting with the hopes of increasing understanding of a field that’s integral to the oil and gas industry:

  • Revenue Accounting
  • Joint Interest Billing (JIB) Accounting
  • General Accounting
  • Audits
  • Regulatory Filing

All oil and gas accounting systems claim they can manage the unique needs of upstream oil and gas operators. When purchasing an accounting system, we recommend looking at what makes your company unique and clearly defining, “why you need a new accounting system.” In most cases, the answer is not clearly defined before the software selection process begins. Without a clear definition of the business requirements, the software selected may not be properly aligned with the business needs. 

Technology has changed the way we do business. Before there were rooms filled with large servers running accounting systems, there were armies of accountants tracking joint interest billing, royalty distribution, and partnerships manually via Green Bar Paper and written ledgers. Today, there are many systems that operate either on-premise or in the cloud – each providing unique benefits that would not have been imagined decades ago.

There's a lot to consider when choosing an upstream oil and gas accounting system, so we created the ultimate guide to help you through the process. You can read the entire guide chapter by chapter, jump to the chapter that applies to your organization, or download a PDF to read later. If you download the full PDF, you will also receive a checklist to take you step-by-step through the purchase of your new system, along with a set of questions to ask.

Revenue accounting is a distinct form of accounting and, if practiced in the oil and gas industry, encounters challenges that are especially unique. The main objective of revenue accounting is to appropriately split the revenue between the working interest partners in a well, pay royalty owners, and file regulatory reports. As a revenue accountant, you must:

  • Receive allocated production and sales volumes, and validate prior to owner distribution
  • Reconcile the purchaser’s statements against the value accrued and recorded for the individual well or measurement point
  • Allocate to producing wells
  • Validate production and severance tax calculation
  • Validate transactions correctly to conform to the terms and conditions of the contracts for pricing and deductions
  • Validate special owner pricing, sharing, and exemptions from deductions and management of ownership changes
  • Reconcile receivables, owner taxes, and other deduction payable accounts

Prior Period Adjustments

Prior period adjustments (PPA) are a common occurrence in oil and gas accounting since revenue is often distributed before ownership is finalized, changes occur in volumes from production, pricing changes, or agreement setup changes. A revenue accountant in this industry must be able to make adjustments as they occur, whether it’s a volumetric change from the field, a price change from the purchaser, changes in regulatory rates, an ownership change from the ownership or division order group, or an agreement change – they all require a PPA. For any type of prior period adjustment, it’s important to keep accurate records and actively track changes in real time.

Having a system that tracks and records the details of a PPA simplifies the process of reversing and rebooking by easily identifying where an issue occurred. Instead of digging through separate records to track down different versions of agreements and their dates, you can quickly determine exactly what caused the change, reverse it, and rebook it based on when the change occurred. With an oil and gas-specific software solution, details aren’t lost, and you save time and money by eliminating spreadsheets and manual processes.

Ownership Changes

In the oil and gas industry, any particular well can change hands at the drop of a hat – leaving you dealing with multiple partners. As a revenue accountant, it’s important to keep track of ownership – who your company is working with. As ownership changes occur frequently, a lag can sometimes develop between the ownership change and when you, as the revenue accountant, are notified. Even when the owner is unknown, their royalty or interest still needs to be recorded. Today, wells can be drilled horizontally for miles and belong to multiple royalty owners, each with unique contracts that need to be accounted for. For a horizontal well, a revenue accountant could juggle transaction records for a large number of owners that could change at any time and cause subsequent agreement changes to the area. Having a software for oil and gas accounting allows you to effortlessly keep tabs on all owners with whom you do business, track any ownership changes, and remove the complexity of horizontal wells.

Revenue Allocations

Almost all wells are comingled with production from other wells prior to sales and production allocations are used to allocate from the sales point to the appropriate well or completion. The revenue allocations then allocate the volumes and values to the individual owners in the well. Allocations are the individual distributions amongst owners and relevant parties of production from wells in a particular field. For the revenue accountants, this process isn’t so clear-cut because each contract has different components and charges that are specific to that contract.  

Revenue accountants calculate the valuation of the product and then allocate that amount to the owners. The value of the product is traced from the point of sale back to the well, taking into consideration any fees and charges that can be deducted from the total revenue. Revenue is then allocated to the different owners at the well level, using those standards to calculate valuation.

Accountants need to make sure that costs are billed appropriately. Integrated product platforms, the backbone of accounting software, can provide everyone with access to data across all systems. With one system of entry for all accountants, it’s easy to keep everything organized and automated notifications are used to ensure everyone is on the same page.

Managing Cash Flow & Revenue Distribution

Accruals is a process to estimate revenue for a period of time which can then be booked to the general ledger (GL) before actual revenue is known. This allows companies to make business decisions earlier, rather than waiting for the actual revenue to be finalized. Once the actuals are calculated, the accrued values are reversed. 

Another process to decrease the amount of time needed to determine what is owed from the pipeline/purchaser is to calculate the revenue using the contract terms and the sales volumes coming from production. This allows you to immediately see if the purchaser paid you the correct amount. Additionally, it allows you to process and distribute revenue prior to receiving the check from the purchaser. 

Visibility into what is owed to you has the added benefit of helping you manage cash flow much quicker, as well as what is coming in, rather than waiting for the check to arrive in the mail.

Having a financial reporting software allows for consistent and accurate cash flow predictions, compiles all revenue information, and enables accountants to conduct a detailed and comprehensive analysis.

Read more: Integrating Distribution & Approvals with Intelligent Finance Workflow

Save Time with Oil & Gas Accounting Solutions

JIB Accounting

Because oil and gas operators almost always partner with other working interest partners to reduce the risk of capital-intensive activities, such as drilling wells and building pipelines, their accountants usually face the responsibilities of calculating the costs that can be shared and allocated to the owners in a process called joint interest billing (JIB). When this occurs, one company handles the operations, the other handles the finances, and the non-operator company is billed monthly for their share. It's the accountant’s job to make sure each organization is charged according to the standards outlined in the operating agreements. On projects with multiple partners, another common responsibility for the accountant is netting. Netting happens when an operator owes a partner revenue but takes out any JIB expenses before making payments. Netting usually occurs when a company is trying to recoup their money. It’s important that an accountant keep detailed records of revenue and costs to ensure that all money owed is collected.

Generating Lease Operating Statements

JIB accountants are responsible for generating lease operating statements (LOS), which are essentially a statement breaking down profit and expenses for each property or well. Lease operating statements are an important means of assessing the health of an operating site. To provide a detailed statement, a JIB accountant needs to assess invoices from every level of the company, including the district, the field, and the well. A skilled JIB accountant should be able to find any inconsistencies in the expenses and assess the profitability of the operating site. This assessment will often rely on the ability to do error exception or reporting by exception to compare costs over months. Using a software program designed for the oil and gas industry makes the search for inconsistencies that much easier.

Maximize Billing to Partners

A JIB accountant uses an operating agreement and the definition established by the Council of Petroleum Accountants Societies (COPAS), to maximize partner billing. If records are mislabeled or lost track of, billable costs could go missing and cause thousands of dollars in losses. Shared costs must be allocated correctly, which is where JIB invoicing comes into play.

Maximizing billing is a challenge that has multiple aspects to it, including determining shared costs and cutbacks. Software created for the oil and gas industry offers a solution by allowing for integration with accounts payable and authorization for expenditure (AFE) for seamless partner allocations.

Cost Center Allocations

Cost center allocations present a different challenge. They give the ability to record expenses at a higher level than they would be calculated at the well. Let’s say your well is serviced by a compressor that services a total of 50 wells. There are costs to run the compressor and costs to service all the wells. Cost service allocations allow you to record costs at the compressor level and allocate it back to your well. Having an oil and gas accounting software that allows JIB accountants to allocate costs based on production creates volume benefits over manual allocations. Robust cost center allocations reduce redundancy with easy allocation.

Calculating & Allocating Overhead

JIB accountants need the ability to allocate different expenses, such as insurance and insurance rates. Operators often have their own insurance, which means not all parties would be billable. While it’s important that all billable costs be accounted for, it’s also important that partners aren’t billed for costs they aren’t responsible for. To avoid this issue, JIB accountants can use a software that gives them what they need – automated COPAS overhead and an insurance application.


Managing Authorization for Expenditures

The final challenge facing JIB accountants is managing authorizations for expenditures (AFE). An AFE is the estimated capital cost of drilling and completing a proposed well. A lease operator prepares the AFE and sends it to each non-operator partner with a working interest for approval before work is undertaken. AFEs make up a big chunk of the costs that a JIB accountant must process. Costs must be attributed to the correct AFE so that any expenses can be easily viewed by partners and compared directly to the estimates. To determine the profitability of the well, it’s important for costs to be accounted for and estimated properly. By attributing costs to the correct AFE, a JIB accountant can create reports that detail whether costs were adequately estimated.

The importance of an AFE is that it helps one manage costs in association with a certain well and allows for better visibility. Oil and gas accounting software integrates automation into the management process and can do the following:

  1. Originate, distribute, and circulate an AFE for approval
  2. Distribute for external partner approval
  3. Capture field level estimates and incurred costs
  4. Capture field tickets and record costs
  5. Report on differences between budget, field estimates, and actuals to identify spending patterns and potential over spend

By using an oil and gas accounting software, a JIB accountant is subject to many benefits in the AFE management process, including:

  1. Efficient and accurate AFE preparation
  2. Total visibility with integrated reporting
  3. Individual AFE accountability
  4. Improved cost control

Audits

Whether you're a revenue, JIB, or general accountant, oil and gas audits are regular and necessary occurrences. There are multiple types of audits that accountants face, including:

  1. Owner audits
  2. Internal audits
  3. Tax audits
  4. Joint interest audits
  5. Financial audits
  6. Contract audits
  7. Partner audits

With so many types of audits and the frequency at which they occur, it's important to have an oil and gas-specific accounting software that tracks activity unique to your industry. With this software, all events and the actions taken are traced within the system with an automated reconciliation feature to ensure everything aligns. By automatically creating an audit trail and recording incidents, mistakes are much less likely to happen.

Regulations

The United States requires the payment of production taxes on sales, but the taxes themselves can differ between states. For an oil and gas organization working with partners and production sites in multiple locations, it can become time-consuming to calculate these individual tax rates.

An oil and gas accounting software will take these regulations into consideration and automatically calculate the different values required for reporting in each state. This provides the flexibility you need to conduct business where you need, all with the assurance that you'll be in compliance with tax codes regardless of where you’re working.

The Accounting Solution for Upstream Oil and Gas Accountants

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General Accounting

While JIB and revenue accountants face challenges unique to their fields, general accountants also have individualized issues that need to be addressed.

Cost Center Accounting

Oil and gas organizations usually have multiple departments qualifying as cost centers. Examples of prevalent cost centers include:

  • Accounting
  • Human Resources
  • IT
  • Maintenance
  • Research & Development

The common thread amongst these departments is that they don’t directly generate revenue for the company and are only responsible for their own expenses.

With an oil and gas accounting tool, it’s easy to track internal expenses across departments, maintain orderly records, quickly compare costs, and identify problem areas. Additionally, dealing primarily with transactions, revenue, and costs from external sources, it’s important for oil and gas organizations to have a simple process for maintaining records internally.

Invoice Management

Ideally, the AFE, invoice, and delivered materials all align, speeding up the accountant's job by allowing them to process invoices faster. A faster process leads to a larger volume of processed invoices, which increases efficiency for the entire organization. Oftentimes, however, the approval process for invoices can often be quite timely, requiring invoices be approved by multiple parties.

With a quality oil and gas accounting software, automatic notifications can be sent for invoice approval, ensuring relevant parties receive the paperwork. Gone are the days of waiting on emails or checking in with supervisors. Simply upload the invoice and wait for approval. It’s also easy to check on the status of an invoice, just log in and view where the invoice is in the process.

Vendor Discounts

One challenge for many accounting departments is processing invoices quickly to take full advantage of vendor discounts. However, the inefficiencies that come with the manual accounting process get in the way of being able to process invoices fast enough to obtain these discounts.

By automating the approval process for invoices, accountants can pay invoices quickly and take full advantage of the vendor discount – saving the organization time and money.

Manual Journal Entries

Manual journal entries are guaranteed to occur in every oil and gas organizations’ accounting department. They’re created to find and fix any errors, record transactions not passing through sub-ledgers (JIB, Revenue, AP, etc.), and ensure ledgers are accurate. Since there can be a high volume of these entries, it can be difficult to keep track of each transaction, and even more so to find relative information about them when needed.

Just like the process for approving invoices, using automation for manual journal entries will ensure proper and timely approvals, create easy access to needed files, and increase integrity of accounting entries made in this process. Ensuring your system can handle and maintain accurate ledgers when a manual journal entry is posted and provide the precise audit trail needed to trace each transaction is an asset to any upstream oil and gas organization.

Managing Line Items

Managing line items is a challenge for most oil and gas accountants because mistakes are all too easy to make and can have very costly effects. A miscoded line item could easily cause the wrong well to be billed for or deliver incorrect data to partners.

To process accounts quickly and correctly, it’s ideal to use software that can handle multiple line items from the large number of invoices that arrive every month. While it’s common to process the entire invoice, mistakes can be better avoided by processing each individual line item.

Applying Deposits Correctly & The Backlog of Receivables

After 90 days, your chances of collecting a receivable go down to less than 50 percent. To ensure they aren’t permanently lost, it’s important to track receivables and monitor how late they are. Being able to track receivables and receive alerts when they’re late is important when monitoring a company’s cash flow and ensures that deposits are applied where they belong.

Why Use an Oil & Gas-Specific Accounting Software

All oil and gas organizations are looking for new ways to become more efficient. A surprisingly simple step to accomplishing this is the easy switch from manual accounting processes to an industry-specific oil and gas accounting software. Manual accounting processes can be time-consuming, confusing, and exhausting. It’s all too easy to make mistakes during data input and extraction, and it can be difficult to access and analyze the data. Accounting software designed specifically for the oil and gas industry can streamline account processing and provide tools and insights that are tailored to the industry-specific needs.


The accounting department of an upstream oil and gas company handles the record keeping of all money-related items from all departments, plus specialized accounting known only to the upstream oil and gas industry. By utilizing oil and gas accounting software, your team can stay focused – spending their time and energy on the truly important tasks – and your entire organization can benefit from the features designed with your industry in mind. With one change, your oil and gas organization can receive many of the tangible benefits outlined below. Continue reading to learn exactly how oil and gas accounting software can positively impact your business.

Efficiency & Automation

Businesses in all industries eventually make the switch to an accounting software and retire bloated and confusing manual accounting processes, such as spreadsheets. Companies within the oil and gas industry are fortunate enough to have accounting software options specifically tailored to their needs.

Many businesses that use accounting software reap the following benefits:

  • Accurate Data: Accounting software computes all totals and is much more accurate than hand-calculated figures and spreadsheet formulas, both of which are often subject to mistakes.
  • Organization: Now all information is in one place. Data that spans departments can stay organized and is easily accessible.
  • Records: Past transactions are easy to reference. No more digging through files and data looking for one specific transaction.
  • Saved Time: How much time does your team currently spend searching through paperwork, trying to make sense of misnamed files or spreadsheets, or coordinating with departments that have different methods of tracking their data? Accounting software allows your team to use their time productively.
  • Automation: Accounting software takes care of redundant tasks and processes, saving you time and hassle.
  • Fewer Errors: Using accounting software leaves less room for errors that typically occur when using spreadsheets.
  • Clear Bottom Line: Having a clear and timely picture of the bottom line makes it easy for your team to find the information they need and helps streamline information sharing.

Accounting systems are designed to give numbers meaning and to perform automated calculations. Every accounting system comes with automated processes that accounting departments can use to take care of some repetitive and menial tasks. Automating tasks, like number crunching and sending alerts, saves time and increases efficiency.

Take a moment to think about the amount of data that goes through your accounting department every month. An oil and gas organization of any size can generate hundreds, if not thousands, of transactions in a single month. Each of those transactions creates data the accounting department is responsible for tracking. Now think, who else needs regular access to that data? Whose job functions rely on that data? That’s a lot of information for a single spreadsheet to hold and a lot of team members that are dependent on it.

Many accounting departments create their own systems of recording and tracking data. They’ll drop the transactional data into a spreadsheet, sometimes without a template, and use lookup and indexing formulas to categorize the data and create a summary report. As new transactions build up every month, this process becomes more and more complicated. Data can easily be lost or miscategorized, especially if more than one team member is inputting the data. The time your team spends maintaining complicated spreadsheets could be used more productively.

Using an oil and gas reporting tool that allows you to collect, automatically aggregate, and analyze transactional data can streamline the data management process and free up your team members’ time. Most of the data manipulation performed in spreadsheets only prepares that data for analysis, it doesn’t analyze it. Additionally, a lot of time and energy is spent preparing data in disconnected spreadsheets, that can easily lose the data when compiling them. An accounting reporting tool with embedded data extraction and aggregation, a consistently defined data model, and relevant, available content minimizes the steps required in manual spreadsheet management – freeing up time for you to focus on the real work, analyzing the results.

Making Data Meaningful & Actionable

A single data point is a lot like a single puzzle piece. You can’t really tell what the entire puzzle looks like based on a single piece, nor can you tell how it fits with the other pieces. Similarly, we need context to make sense of singular data points. This can be difficult because we’re often not using data in its original context. We extract data, analyze it, and send it on – hoping that the meaning follows. The truth is, no matter how expertly data is originally analyzed, the further it travels from its source, the more difficult it is to discern its context and meaning.

However, well-designed reports and visualizations can ensure that the implications of the data aren’t lost in translation. Everyone on your team should be able to understand the meaning of data without having to go back to the original source. A strong visual can easily emphasize trends and anomalies, accelerating understanding and transforming time normally spent scrutinizing line items into acting on the analysis results.

Easy Reporting

Oil and gas accounting software can deliver timely and accurate financial information whenever necessary. It’s difficult enough to track data, but it can be just as difficult to keep track of when the information is needed and by whom.

In an active work environment, accounting software can help you in a crunch. Let’s say the finance director of your oil and gas organization needs a report of cash-flow for a meeting in two hours. Instead of scrambling to find the correct data, throwing a report together, and hoping it’s clear and concise, you can use your oil and gas accounting software’s built-in reporting tool to easily create a report on the fly. Now, the finance director has the information and visuals needed for the meeting, and your work schedule wasn’t thrown off trying to make a last-minute report.

Cut out the hassle that keeps you from understanding and using your data by effortlessly creating easy-to-understand reports with an oil and gas accounting software.

Organized Tax Filing

Any accounting software can make tax season a lot less stressful and more simple. Filing business taxes is a complicated process for any business, especially for a business in the petroleum industry that needs to closely track a high influx of transactions. Time-consuming, disorganized records are the bane of any oil and gas accounting department. Petroleum accounting software captures all the business’s financial information and integrates with tax filing programs to create reports that require less time and resources. Taxes filed inaccurately or late can result in fines, penalties, and even legal issues. An accounting software allows you to bypass these pitfalls, ensuring a smooth tax season.

Audits

When it comes to audits, you need accurate and complete accounting records. Auditors check ledgers for correct and complete information and, if an auditor finds inconsistencies, it could mean a penalty or fine – at a minimum, it requires extra time and cost to produce the additional information requested to back up questioned transactions. Accounting by way of spreadsheets often leads to more errors than using accounting software, and errors increase the chances of getting audited or, in the event of an internal audit, it increases the chance of mistakes being found.

Accuracy Over Spreadsheets

Even the most staunch and steady accountants are subject to the occasional slip-up. With so many calculations distributed across so many spreadsheets, an error is easy to make and much more difficult to find. After-all, we’re only human, right? And being human means making mistakes, but even little mistakes can have a huge impact on the bottom line. Oil and gas accounting software automates the calculations you’d normally have to do manually and subsequently reduces those pesky human errors. With accounting software, you can avoid difficulties such as:

  • Formula errors
  • Lack of audit trail
  • Lack of integration with other applications
  • Version control

Controlled Access & Consistent Input

Using spreadsheets to create month-end or on-the-fly analysis is a timely process that keeps you from analyzing the data. The first step is importing data, often from various sources, which is never as simple as it should be and requires a process of double checking on its own. Did all the data come into the spreadsheet in a usable format? Are the units of measurement consistent? Are they representative of the same duration? After the data is imported, the inevitable data cleanup begins. Hopefully, someone created a template to use and, hopefully, the entire team has been using the template consistently. More data means more individual tracking methods and soon the spreadsheet is too large to easily share for quick review and discussion.

With the right oil and gas accounting software, users can log in to access the most up-to-date set of data. There’s no need to ‘ship the data’ to each person by sharing a link and running the risk that team members are working on different versions, inadvertently creating more compilation tasks in the long run.

Rather than using spreadsheets to control who has access to what data, effective accounting software will provide the necessary user-level permission setting and controls without creating a burden on administrative teams or requiring broad access to the applications where the data is created and controlled. All data is kept in one place and all team members have access to the aspects they need to ensure everyone’s data is consistent and accurate.

Security

Not only is sharing links and misplacing information an internal nightmare, but it also puts your company at risk. Financial data is the most sensitive information within an oil and gas organization and must be kept confidential and protected from unauthorized users, corruption, and even getting lost. Complicated spreadsheets that are constantly updated and passed around aren’t just confusing, they’re also a security risk. Accounting software protects your data and allows the creation of a backup, so you can easily retrieve files. By controlling who has access to your data, you keep your company secure.

Forecasting & Cash Flows

Accounting software makes it easy to form realistic financial forecasts. By laying out your organization’s financial history, you can track progress and get a clear picture of income and expense patterns. By comparing monthly reports, you can accurately track and predict cash flow. Once you have an idea of how much your business is likely to spend, you can easily create a budget and actively make smart purchasing decisions.

Accurate cash-flow analysis is one of the surest ways to assess the health of an organization. Tracking and predicting your spending ensures all spending is completely necessary and that there’s always money in the bank to cover costs.

Oil and gas accounting software provides several different features to help upstream oil and gas organizations pinpoint areas in need of more attention. The only way to control the flow of your money is to understand the flow of your money. Decrease unnecessary spending and maximize the bottom line by accurately analyzing your company’s cash flow with an oil and gas accounting software.

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Automate Oil & Gas Accounting Processes

What Features to Look for
in Oil & Gas Accounting Software

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While oil and gas organizations often underestimate their accounting platform, it’s actually the backbone of how successful they are as an organization. The right software can streamline your business and will have a direct impact on your success. Antiquated general accounting systems require more time and money, which quickly adds up and impacts the overall health of your business.

So, how do you go about choosing a software that will have a positive effect on your organization? A good place to start is to assess the features in any given accounting software so that when it comes time to choose an oil and gas accounting software, you know what features are essential to your organization.

Review the following features to ensure the software you choose best suits the needs of your upstream oil and gas accounting department.

Reporting

A reporting system collects, stores, analyzes, and gives access to important data. It provides information in report and dashboard formats, such as profits and costs per well, losses, owner payments, taxes, and so much more. Integrated reporting tools allow you to quickly and conveniently check your business data at any point in time.

Security

The security of an organization’s information is crucial. In any business, there is sensitive data that needs to be kept safe, and this is especially true in accounting. There are two types of security for data: physical and platform-based. Physical security is having your information on hard drives or other backup options that can be carried and locked away. Platform security involves a cloud-based system that can manage security. Cloud security provides another level of safety by preventing important files and data from ever being physically touched. You shouldn’t have to worry about your sensitive data getting into the wrong hands.

When deciding what security options are important, be sure to consider:

  • Firewalls: These should be provided by reputable companies and your data should be secured behind them.
  • Vulnerability Scanning: The servers should be scanned on a regular basis to test for intrusions from both outside and inside the network.
  • Intrusion Detection & Prevention System: Should an intrusion occur, an intrusion detection system should monitor the network so that any suspicious activity can be caught and dealt with quickly and efficiently.
  • Multiple Servers & Data Centers: Data servers should be in facilities that provide constant surveillance and security. Multiple servers being used as backup centers should be in different locations.
  • Regular Backups: The same way you should back up a document every hundred strokes, your company data should be backed up at least every day. This should occur in a location away from the main center so that, in case something is lost or damaged, data and records can quickly be restored. This way, your business never misses a beat, even in the face of disaster.

Accessibility

Accessing your data anywhere at any time allows you to be more efficient. With a trusted device, such as a laptop, and access to the internet, a cloud-based software allows you to access your data anywhere.

Accounts Payable Processing

Oil and gas operations require a lot of equipment and services in the field. This generates hundreds, if not thousands, of incoming invoices which are time consuming to manage, approve, and pay. It’s important that the accounting solution you choose has the ability to manage this process in an automated fashion as much as possible.

Storing expenses in one digital space with easy access throughout the organization is an easy way to keep track of and share important data. By storing your expenses digitally, you're also provided with a convenient overview of your profits and losses. This provides management the ability to see a snapshot of the financial health of the company at any given time and simplifies decisions in the long run.

User Experience

Being able to quickly learn and use an accounting software platform directly impacts how successful your company is utilizing its features. Any software platform you consider should not only be easier to use than your current system, but it should also make the user's job easier and provide feature-rich functionality that wasn’t available before. User satisfaction and a positive experience are important for the business.

Customer Support

All purchases may need a level of customer support, which makes it an important resource to consider when choosing software. Examine what types of customer support are available, whether there's an option for email or the ability to submit questions and concerns through forums or forms. In any form of communication, it's important that you can reach a company during business hours or when there is a high-severity issue. Having multiple points of contact, a quick response time, and customer support telephone numbers listed are a good indication that there's a team dedicated to helping customers.

Training Support, Learning Curve, & Ease of Migrations

While customer service is certainly important, it’s equally vital that a software provider has strong training support. Proper training is integral when learning a new software and ensures that you run into fewer speed bumps down the road. If the learning curve for new software is steep, it will be more difficult for employees to adjust. Others may also be affected by these changes and need support during certain situations, such as when they receive an invoice. Active training support to ease the transition increases efficiency when issues occur.

Integrations

Integration between systems must be possible. Entering the same data into multiple systems leads to redundancy, opportunity for errors, and wasted time. Continuously adding integrations makes your life easier, from the head office to the local sites. A single accounting and reporting database allows you to achieve that level of integration.

Automation

Automating tasks increases efficiency and productivity and should be taken into consideration for both your simple and complex software needs. Your software should analyze, manage, and present financial information as needed. While the software should be able to automate period closes, it should also include support for other needs, such as multiple ledgers, accrual, and cash basis bookkeeping. The software that you decide to use should complete core business and financial processes automatically, giving your team more time to do what matters, like analyzing data.

Success of Your Potential Vendor

The solvency of a business indicates the number of liabilities they may have. Working with a vendor that has successfully been in business for a number of years and ensures they’ll be around as your company grows is important. Working with a successful company that has cash reserves to tackle any IT catastrophe will give you the peace of mind that your vendor can weather any storm and your accounting system will continue to be supported.

Map Your Business Process

Mapping business processes is vital when assessing the functional requirements for accounting software. Understanding the business’s workflow will provide insight into how different information and functions affect different levels of the company. By mapping the business processes, one can determine what functions from your current software are being utilized, which functions are needed, and which processes could be streamlined through automation.

How to Evaluate Your Oil & Gas Software Needs

One of the challenges oil and gas accounting departments face is finding an accounting system tailored to their needs. Traditional software doesn't have many of the processes specific to oil and gas, such as AFE, JIB, and revenue accounting. This lack of functionality can be frustrating and takes up energy and time that could be spent more productively. While these difficulties may inspire a company to invest in new software, it’s important not to buy anything compulsively and take time to assess the business’s needs and the potential software’s compatibility. It’s also important to define the functional requirements you need for this software – particularly around its ability to support your organization’s financial processes and deliver valuable business insights. Below are a few steps anyone can employ to assess their functional requirements.

Survey Employees

Accounting software affects everyone who uses it. They can each provide a unique perspective on the functionality of the current software, if one is being utilized. Start in your department and make your way through the entire business – ask about their needs and how the current accounting processes meet their expectations and what improvements they’d like to see. While it's important to speak to decision-makers about what they need in an accounting system, the best way to assess how an accounting software will affect the different levels of a business is to contact users directly. By assessing and prioritizing the needs of every accounting software user, one can invest in software that is sure to increase workflow and productivity. Remember, it’s impossible to make a decision that will leave everyone completely satisfied – so be sure to ask users to prioritize their needs to ensure the most important issues are dealt with.

List Necessary Functions

Based on the business process map and employee input, create a list of required functions that can be easily compared to the functionality of different software packages. By compiling disparate needs from across the company, you may be able to recognize patterns and greater concerns regarding productivity. Software frustrations that were believed to be localized to an individual or department may be more widespread and having a greater effect on the business than originally believed. Laying out all the functionality needs will also make assessing potential software a fast and easy process. While the specific needs of any business will differ, it’s important to compile a list of functionality needs. As a general guideline, an accounting system should:

  • Prepare information for compliance requirements
  • Track work in progress, orders, jobs, and other task management requirements
  • Produce separate financial reports
  • Easily integrate with other systems you're operating
  • Produce reports, such as ‘dashboard’ reports. Determine whether such reports can be configured to meet your requirements without impacting maintenance and support
  • Allow you to manage permissions so that users only have access to the parts of the system that is relevant to their work

Now it’s time to start thinking about different application architecture and discover which will be the best fit for your oil and gas organization. While some companies prefer the perceived security of an on-premise model, a cloud-based accounting system can help lower IT costs, reduce technology risks, and improve productivity.

Consider Industry Needs

A business in the oil and gas industry requires certain functions from accounting software that are typically not offered by generic accounting platforms. Time and resources are often utilized to compensate for this loss of functionality, creating workarounds and manual systems. An accounting system designed specifically for the oil and gas industry should.

  • Eliminate the need for separate data entry in production, land, and accounting systems. Wouldn’t it be great to be able to enter data into your system once and have it appear across your entire organization? Having all your critical information processed by one central repository allows for effective control over versioning, diminishes the need to re-key data, and allows the same data to be visible across your entire business – reducing your chance of errors.
  • Provide automated, flexible financial processes. A modern general ledger lets you manage, analyze, and ultimately report your financial information the way you want – requiring external reporting tools. Your system should enable you to automate and manage core financial data and business processes, such as month-end reporting, revenue accounting, and other financial and management reports.
  • Provide multiple ledgers without degrading general ledger performance. Accounting systems in the oil and gas industry should have multiple ledgers with drill-down capabilities, organizational hierarchy, workflows and charts of accounts, and real-time consolidation of data. They should create both regulatory and compliance reports, process transactions independently, and provide ledgers specific for accounts receivable, accounts payable, order management, project management, and cash management.
  • Provide real-time, valuable business insights. An oil and gas accounting system should provide in-depth, real-time insight into your business, allowing you to capitalize on new opportunities or quickly recognize the need for corrective action. To gain greater insight, your system should categorize transactions by cost center, product, location, department, and more. The software should quickly analyze results by operating unit, location, project, and owner.

Define Your Technical & Operational Requirements

With a cloud-based accounting system, you only pay for what you use and the vendor handles IT issues and upgrades. An on-premise model detracts time and resources through maintenance and security needs. If you’re leaning towards adopting a cloud-based solution, be sure to assess the software platform as no two systems are made the same. Any cloud-based accounting platform should provide the following operational and technical capabilities:

  • Variable scalability for high performance
  • Enterprise-class security, backup, disaster recovery, and performance monitoring
  • Included software updates that reflect the latest accounting standards and software features
  • Transparent service-level agreements (SLAs) around uptime and performance

Evaluate Solutions Based on Your Organizational Needs

After assessing your oil and gas organization’s specific requirements and determining which software architecture is preferred, it’s time to evaluate the possible solutions. Be sure to include the following tips in your decision-making process:

Prioritize Necessary Over Ideal

Don’t get caught up in the shiny features you may never use. Your new accounting platform’s success relies on you to stay focused on what your organization needs to run more efficiently. Take a second look at employee input and look for patterns in the capabilities they prioritize. All needs may not be met, but the absolute necessary ones should take precedence.

Check References

Call existing customers and ask pointed questions about the vendor, product, and service levels, and – most importantly – ask whether they’d make the same choice if they had to do it all over again. The software company should assist in finding a customer of comparable size, so the comparison can be as linear as possible. Whether or not they're satisfied with the software, they can still provide useful insights into functionalities or systems you didn’t previously consider.

Look into Cloud Vendors’ Infrastructures & Business Practices

Make sure the vendor’s security, performance, and availability capabilities are much greater than your own, and that you’ll own the data. These aspects should never take a downgrade in exchange for other functions.

3rd Party Integrations

If your organization is going to invest in an accounting system, it's imperative that it's easy to use, well supported, and easy to integrate with other products your organization uses.

Research the Vendor’s Reputation Online

Leverage search engines, reviews, and social media sites to gauge how the vendor is perceived in the marketplace. Be sure to work with an organization that has:

  • Industry heritage
  • An exclusive focus on upstream oil and gas accounting systems
  • Proven longevity, sustained growth, and financial strength
  • Systems and services focused on upstream oil and gas accounting

Looking for a Flexible Oil and Gas Accounting Solution?

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Learn more about P2's accounting solutions, used by more than 500 customers of all sizes.

On-Premise Model

  • Upfront license fees
  • Customer responsibility for all IT costs and risk
  • Customer responsibility for all upgrade costs and risk
  • Limited internal support and resources

Cloud-Based Model

  • Pay for what you use
  • Vendor responsibility for all IT costs and risk
  • Vendor responsibility for all upgrade costs and risk
  • Customers reap benefits of economies of scale

Cloud vs. On-Premise

Accounts Receivable Processing

In the oil and gas industry, many receivables are from the sale of oil and gas products. It’s critical that this functionality integrates with the revenue process to ensure the amount received equals the amount distributed.

New Well Workflows

When a new well comes online, it’s important that notifications be sent out to multiple departments, such as the accounting team. Failure to quickly notify the correct people can result in delayed payments for owners and royalties. This process is often maintained on two or more systems, such as accounting, production, land, spreadsheets, and homegrown solutions. Setting up oil and gas accounting systems and processes properly with automated workflows is a key indicator of an effective oil and gas accounting software.

Having a system that sends reminders for overdue notices helps ensure payments will be received on time. Having one software that can do all of this leaves you with less to worry about.

Updates to Software

Due to a lack of knowledge around a software’s capability and processes being performed in spreadsheets outside of the system, there is often a perceived need for new software. Since these capabilities are often released in software updates, when a client doesn’t upgrade regularly, it’s another point that causes a perceived need for new software. When companies use software that no longer updates, they quickly outgrow it and need to find a replacement. In choosing a new oil and gas accounting software, it's important to choose a progressive platform managed by a company that is here to stay and believes in continuously perfecting its product. Cloud-based programs have the added bonus in that they update without needing manual upgrades. When talking to different vendors, ask them about their roadmaps and how often they update their program for software glitches and new features.

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