Poor Billing Practices: Sin #4 of the 10 Deadliest Sins of Oilfield Service Companies

You perform the work, you bill for the work, you get paid for the work. Oilfield service companies typically do the first part very well. Even so, many companies find their cash flow under constant pressure. What’s the problem?

According to Jory Lamb, President and CEO of VistaVu Solutions, nothing crushes a company’s cash flow like the inability to get an accurate invoice out the door quickly.

“There are two variables and one constant here,” says Lamb. “The variables are how long it takes you to create an invoice and how long your client takes to pay it. The constant is the fact that your own employees must be paid on time. When cash flow is tight, companies will meet payroll out of their operating line, not out of revenue. That’s expensive, and in the long run, it can be fatal.”

While energy service companies are high-tech when it comes to performing the work, many are still old-school in terms of getting paid. Field tickets and third-party bills come to the office, are entered into the system and over the course of several weeks, an invoice is generated. The manual component of many companies’ billing systems leads to errors or omissions on invoices and causes delays in payment from the client.

“The biggest thing that holds up bills is mistakes,” says Lamb. “The second is the time between capturing the information in the field and getting it on your bill. To collapse the time between doing the job and getting paid for the job, you need a quicker invoice and a more accurate invoice.”

Lamb recalls an instance a few years ago, where VistaVu worked with a company experiencing cash flow problems related to poor billing practices. By tightening up its procedures, and using the right energy services software, this company went from taking 30 days to generate an invoice down to 7 days. Just as important, the new invoices were more accurate, so the company received payment from their clients sooner. Improved cash flow allowed the company to stay out of its operating line on paydays.

Says Lamb: “Between better cash flow and lower interest costs, being able to quickly generate accurate invoices paid for the new system. Poor billing practices can hurt your business, but with the right advice and the right system, improving how you invoice is straightforward.”