|Date Published||May 29, 2014|
|Company||Leadstone Group Inc., Oilfield HUB, Oilfield PULSE|
|Article Author||Kevin Turko|
|Article Type||May – June 2014 Issue|
|Tags||Invoice Reconciliation, Oilfield Rentals, Oilfield Report Manager, ORM|
Oilfield HUB provides Operators with online tools to search for, locate, order and manage a rental. Our new Oilfield Report Manager (ORM) plug-intakes over once the rental is delivered to the lease, from both an operations and money perspective. All of this HUB and ORM information is being tracked by and is available to Operators; and there it sits awaiting the receipt of the service companyâ€™s invoice. And then the reconciliation and approval fun begins!Â
Operators need to close the loop at the end of the rental by providing better data and more details to the vendor covering the rental, before the actual invoice is issued. Reconciliation and approval headaches and woes would vanish on both sides of the fence, along with substantial needless costs.
My best analogy… imagine if the car rental business ran like rentals in the oil and gas industry!
First, the rental car company has to deliver the car to my hotel. We agree on a daily rate, but with no firm commitment from me as to when Iâ€™m going to start using it, when I intend to return it, or how much Iâ€™m willing to pay overall. I sign for the car when it arrives at the hotel. Along the way I may or may not have told them when I started using the car, because I donâ€™t intend to pay for the period between drop off and first use. Also, I likely donâ€™t intend to pay for the car on those days or weekends when I didnâ€™t use it because I decided to lounge by the pool. When I am finally done with the car, I donâ€™t drop it off, I tell the car rental company to come and get it, all at a momentâ€™s notice when I decide I no longer need the vehicle. I realize I might also get charged to clean and gas up the car but am not totally sure what those costs will be. I tell the car rental company to invoice my office for the amount owing as I am headed back to the airport. Most of the communication between me and the car rental company is done by phone or email with one or more of their people, and I may or may not have given my office all of these details.
When the car gets returned to the lot, they pullÂ my original delivery receipt and prepare an invoice for the entire rental period. Seeing as I had the car longer than anticipated, they had already invoiced me for some of the rental costs, so a spilt bill is created. The car rental company inadvertently bills me again for three days that appeared in the original invoice (double billing) and for the days where I advised I was not using the vehicle (over billing). They donâ€™t have the cleaning costs yet, so they decide to bill those costs at a later date. The invoice is also incorrect as they donâ€™t have accurate records as to when I started using the vehicle, and they might have over charged me as I said to pick up the vehicle on Thursday but it actually wasnâ€™t picked up until Saturday.
Closing the loop on oilfield rentals is essential,
Â as is the need to change the direction of the information flow
The invoice arrives at my office. My admin person doesnâ€™t look at the original invoice, so the three day double billing is approved in error. Worst yet, seeing as the invoice doesnâ€™t coincide with our records,Â we simply put it aside and donâ€™t bother to tell theÂ car rental company it is incorrect. When they finally contact us about the outstanding payment, we tell them the invoice is wrong and must be reissued. We go back and forth several times with the car rental company to settle the discrepancies, and agree on the final invoice. This takes a few weeks as I am away on another business trip and am not available to approve each of the changes. When we finally receive the new invoice, it still includes the 3 day overcharge everyone missed, and then it is paid. Six weeks later we get another invoice for the extraÂ charges and reluctantly pay it, as we really donâ€™t have material backup to reconcile and pay the extra fees, so it is approved based on memory, not on fact.
While perhaps a very extreme analogy, this is exactly what is happening with rentals in the oilÂ and gas industry each and every day. Closing the loop on oilfield rentals is essential, as is the need to change the direction of the information flow. Doing so will go a long way to eliminating these needless and time consuming reconciliation and approval issues. Cost efficiencies will result!
Easily done? Not so much! Watch for our upcoming white paper on oilfield rentals. We are also looking to partner with true industry believers who want to get this solved. Give me a call to get involved!
Â This article originally appeared in the Â