Are you guilty of committing the second sin on our list of the 10 Deadliest Sins of Oilfield Service Companies?

Lack of Internal Financial Controls 

In the North American oilfield services industry, sales don't grow on trees. Whether your business is construction, equipment, rentals or services, project bidding is competitive and a compelling price is always an issue.

Since capturing revenue is so challenging, Jory Lamb wonders why some companies don't make retaining that revenue more of a priority.

“As I meet with oilfield service companies, some do not have the rigorous internal controls that are needed to ensure a meaningful profit,” says Lamb, President and CEO of VistaVu Solutions. "In fact, insufficient financial controls are a serious issue for companies in many industries."

Lamb cites the example of one firm he met several years ago, that produced a mere $50,000 in profit on $15 million of yearly sales. This poor result came largely because internal financial controls were practically non-existent. Virtually anyone could issue a purchase order to anyone for any amount.

As Lamb discussed with the company's leadership, this puts a company at risk on several levels.

First

• Ownership won't receive the kind of profit they expect and deserve.

Second

• Poor profitability prevents the company from investing in talented staff, more productive equipment and innovative technology.

Third

• This sort of wild-west environment offers a tempting invitation to those who may seek to defraud the company.

Says Lamb: "My experience is, no matter how good your marketing and sales program, lack of internal financial controls can take every dollar you produce, and more."

Once this company’s leadership decided to change, Lamb worked with them to achieve it. The company set up policies for internal financial processes, and enforced these on a day-to-day basis with its SAP Business One software. Within three years, strictly from internally generated cash flow, the company had started several businesses and moved into a new headquarters.

"Once a company has decided on the process policies it wants, we can set up SAP Business One to make it happen," says Lamb. "We can create a system of authorizations, approvals and alerts that help you keep more of your hard-earned revenue where it belongs, in the company."