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Home » Blog » Accounting Basics » 5 Signs for E&Ps to Start Outsourcing their Accounting

by | Last updated Jul 13, 2022 | Published on Jul 13, 2022

If you read our Outsourced Accounting FAQs blog, you might have an idea of the optimal times for a business to start outsourcing, but how do you know if you need to outsource in the first place? In this blog, we’ve gone over some of the biggest red flags that small and mid-size E&Ps should be wary about in their accounting operations. If your business is suffering from one or more of the issues described below, now is the time to consider outsourcing your accounting functions.

Sign #1: You don’t have enough time to run your business

This is the easiest red flag to identify and one of the main reasons small E&P companies switch to outsourced accounting. Tax laws are constantly changing, and keeping up with the tides of shifting regulatory trends is a full-time job in of itself. Small E&P owners don’t have the time to adjust to these changes all on their own without greatly sacrificing their own duties.

If you are an E&P owner and you spend a significant part of your day-to-day operations managing your revenue accounting, producing lease operating statements or well profitability reports, managing line items, creating manual journal entries, or preparing for an audit, you are losing valuable time that you could be spending on production.

Sign 2: You were forced to pass the buck to unqualified team members

A common response to the first red flag, a business owner who loses too much time managing his or her own accounting functions may decide to pass those responsibilities to employees, even if they have no experience dealing with accounts. Pulling your employees away from the duties they were hired to do and having them perform two different roles will reduce company productivity, increase the risk of errors in your bookkeeping being discovered during an audit, lead to poor reporting and decision-making due to backlog, and potentially cause mistakes in your SEC filings and IRS tax returns.

Sign 3: You’re fed up with your legacy software

Do your daily drilling reports take hours to complete? Are you concerned about your data security being compromised? Is your business spending more money maintaining legacy software than it’s worth?

If you answered “yes” to any of these questions, switching to a cloud-based ERP software is a good next step for your business. Modern ERP software solutions make managing well data, generating reports, and tracking field expenses take minutes to complete, compared to the hours spent with manual processes and legacy software. These software platforms offer an easy to operate, user-friendly interface, top-of-the-line internal security controls, streamlined processes for complex functions (such as JIB, AFE, and revenue distribution), automatic audit trails, and so much more— all at a lower cost than maintaining legacy software over time.

However, switching to a cloud-based ERP can be tedious and complicated— that’s why so many E&Ps still use the same legacy software they’ve used for decades. Your in-house accountants, if you have them, would need to be trained to use the new software, and data migration is nothing short of a headache. By outsourcing your accounting, not only can we handle your data conversion for you, but you’ll have a team of experts with years of experience with several front-running ERP software behind your back. No need to worry about new user training.

For a closer look into the ERP software that we use, you can check out what OGsys, PakEnergy, and W Energy Software have to offer. And when you outsource with PetroLedger, we will assist you with every step of your software conversion.

Sign 4: You’re experiencing rapid business growth

So your business is really starting to take off: that’s great news! But if you aren’t prepared to quickly accommodate for that growth, then scaling your business might end up doing more harm than good. Growing pains are only going to slow you down if you develop too fast to keep up with your finances. Your first impulse might be to add new faces to your accounting team, but with that comes some steep costs— you would have to cover the wages and benefits of every new accountant you hire, and a large, in-house bookkeeping team is very expensive to maintain.

When you outsource with PetroLedger, you pay for the services you need from a team that knows the ins-and-outs of Oil & Gas accounting, without the costs of hiring new employees. And we won’t simply replace your existing staff; we’ll integrate alongside your team and ensure that your internal controls are streamlined and efficient.   

Sign 5: You’re stuck with backlog

Accounting backlogs are a common reality for small E&P companies, especially if they have a team of only one or two in-house accountants. There are several negative consequences that can appear because of an accounting backlog:

  • Delayed paychecks to your employees
  • Late SEC filings and tax returns
  • Lower production efficiency
  • No clear vision for revenue growth or profit/loss

When you leave your accounting to a single accountant, you can’t expect your books to be constantly maintained— in addition to sick days and vacation time, what would happen if your accountant needed to take long-term sick leave? To keep your financial records up-to-date at all times, you need to prepare for the unpredictable. When you outsource, you have an entire team of accountants you can rely on, making backlogs a thing of the past.

 

Switching to outsourcing when you already have a system in place for your books can be daunting. It demands a lot of adjustment: your company structure and ERP software will probably change. But with that change comes more time than ever to focus on other integral parts of your business that previously didn’t receive enough attention. You can also expect higher productivity from your in-house team, consistent management of your books by our Oil & Gas accounting professionals with over 15 years of experience, and lower accounting costs over time.

If you’re struggling with any one of these five red flags, call our Sales Team or send us an email so we can discuss setting up a customized, competitively-priced solution for you and your team.

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ABOUT THE AUTHOR

<a href="https://www.petro-ledger.com/author/lrabalaispetro-ledger-com/" target="_self">Lauren Rabalais</a>

Lauren Rabalais

Author

Creative Marketing Associate

Lauren, one of our youngest team members, comes to PetroLedger shortly after obtaining her Digital Media Innovation degree from Texas State University. Armed with knowledge of digital and social media trends, Lauren brings a fresh perspective to PetroLedger’s online identity and ensures that our company reaches new clients.

Email Lauren: lrabalais@petro-ledger.com