Even before the pandemic destroyed demand in oil and gas, margins were shrinking, shareholders demanded proof of returns and there was a resounding cry to “Do More with less” across the energy industry. As oil prices fell to sub-zero levels, lay-offs were prevalent and reduced internal teams were left to shoulder the workload. Fast-forward to today and we are seeing the industry take this rally cry seriously and implement new technology, automation, and processes to successfully do more with less, and reap the benefits.
One opportunity some OpenInvoice users are taking full advantage of is touchless invoicing. Below we discuss this concept in more detail, including the benefits of touchless invoicing and examples of customer results with this automated approval workflow.
Why touchless invoicing?
Despite the perception that oil and gas operations are dominated by expensive equipment and complex services, most invoices in the industry are surprisingly small. In fact, in an analysis of invoices in OpenInvoice over a one-year period, Enverus found that more than 50% of invoices were less than $1,000 and almost 80% were less than $5,000. Yet, the amount of time spent managing invoices is surprisingly similar, regardless of the invoice amount because each invoice has the following four items:
- Price validation
- Scope and quantity
- Cost Object (AFE or cost center validation)
- General ledger Code (GL code)
Also, part of the approval workflow creates a double touch. In operations, the person responsible for the review and authorization of supplier work is often the same person who approves the ultimate invoice. This requires double effort, not only to review scope, quantity, and pricing related to the work done, but also to ensure the work is coded correctly. This is an unnecessary use of time and resources, particularly when both are in short supply.
What is a Touchless Invoice?
In OpenInvoice, a touchless invoice means when an invoice is submitted, the system automatically validates the coding and auto-approves the invoice based on controls put in place by the customer. Once the invoice is auto-approved it automatically posts to the customer’s ERP system for payment.
Two powerful capabilities make this possible: automatic invoice validation and auto-approvals. Every invoice attribute (scope, quantity and price) is automatically reviewed and validated between the approved ticket and the invoice; if there is a match, the invoice is automatically created. Auto-approvals allow operators to automatically route, code, and approve invoices at or below a specific spend threshold. By reducing the number of touches required by accounts payable and operations, you speed up the entire invoice process.
What if you could auto-approve your high volume low-value invoices like water hauling tickets? How much time would this save your AP team, providing them more time to focus on core tasks that drive the business forward?
What if your company took this further and automated invoice approvals for invoices under $5,000? Then 10,000? You would essentially eliminate 90% of your AP burden!
Permian Operator Reduces Invoice Cycles Times with Touchless Invoicing
One large Permian operator has already fully automated coding validation and approval of 40% of its invoice volume. Another 20-30% of its invoice approvals are partially automated—meaning either the coding is auto-validated or the invoice is auto-approved.
The operator was experiencing high growth in Permian Basin and looked to align assets and reduce G&A costs. On average the company processes 25,000 invoices per month but has seen volumes of 40-60,000 in peak times. The company examined its OpenInvoice data to see how it could improve its invoice process. A benefit of using a complete digital workflow from the opening of an invoice to the invoice approval is every step is trackable.
The company was surprised to see only 2% of their invoice volume was being disputed. Also, often in this review process, the same person that approves the field ticket must also approve the invoice, creating a double touch. After analyzing the data, the company realized approvers spent on average eight seconds to approve low value invoices. This indicated that the approvers didn’t have time to properly review the invoices due to the number of low value invoices coming through that needed approval.
Realizing this double touch created an unnecessary bottleneck, the company decided to implement invoice auto-approvals, so that if the field ticket and the invoice contain the same information, the approver doesn’t need to review the invoice.
The company wanted to show the positive effects of the invoice approval automation, so the company spent a year, extracting date from its OpenInvoice instance. Here are the company’s findings:
- Automation increases the touchless invoices which reduces cycle time;
- Manual users are able to focus on processing the high value invoices faster and approvers can focus more on managing overall budget; and
- The invoice processing time decreased which led to more early payment discounts.
The operator has since fully automated 40% of its invoice approvals and partially automated between 20-30%.
“Those percentages, whether you go from 20,000 to 60,000 invoices, is going to be the same. We’re still going to hit forty thousand for 40 percent, no touch. And so that’s been great in letting us know how many resources we need to bring back on if we have a spike. We can forecast a little bit more than we used to at the resource time needed in that department.” -Lead Accountant, Permian Operator
Touchless invoicing offers a massive opportunity for energy companies to reduce their overall invoice processing cycle times, which leads to more discounts. Also, by removing repetitive, manual work, your team can focus more on high-value add activities like cost analysis, forecasting, and budget control.
If you are ready to learn more about how touchless invoicing can save your company time and resources, contact us at [email protected] or call us at 1-800-242-4245 to set up your complimentary business review with our team of experts.