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.
This is the easiest 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 practically a full-time job. Small E&P owners don’t have time to adjust to these changes all on their own without 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.
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.
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, check out OGsys, PakEnergy, and W Energy Software. And when you outsource with PetroLedger, we will assist you with every step of your software conversion.
So your business is really starting to take off: that’s great news! But if you aren’t prepared to accommodate for that growth, then scaling your business might do 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 you have streamlined and efficient internal controls.
Accounting backlogs are a common reality for small E&P companies, especially if they have only one or two in-house accountants. There are several negative consequences that can appear because of an accounting backlog:
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 to 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 to focus on other 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.
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.
The journey from old to new oil and gas software can be an arduous one. On top of the complications that can arise during the data conversion process, many companies come to realize post-conversion that their new software may not be as good of a fit as they believed. But data conversions are costly, time-consuming projects; you really want to get these right the first time. With over 25 years of experience migrating client data, we’ll be there to help you make the decision that’s best for your business, whether your data comes from industry-standard applications, QuickBooks, legacy software, or any other unsupported systems. Our scoping process is thorough, and we’ll recommend the application we think is the best for you after some conversation about your needs. But before you decide to pull the trigger on a data conversion, here are three important questions your company should consider.
Nothing is scarier during Halloween season than knowing your 1099 filing deadlines are creeping closer. We know how much of an enormous headache the 1099 filing process is— that’s why it’s one of our most-requested services we offer to our clients. But there’s no need to stress this year: here is how outsourcing your 1099 processing can help you relax this season.
An inaccurate division order can spell a lot of trouble for all parties involved. Mispayments are not always detected expeditiously, and they can often create practical and legal challenges if they are not resolved quickly. However, the unfortunate reality for operators is that, without thorough oversight, inaccuracies are inevitable, especially when you factor in varying division order laws from state to state. These mispayments are usually caused by simple human error: miscalculations, typos, system errors, ownership analysis errors, and so on.
Our vision at PetroLedger is to be the partner of choice within the oil and gas industry for outsourced accounting and transaction services by employing the best-in-class people and processes across multiple technology platforms. Our most experienced and versatile staff resides in our Professional Services department. If you ask any of our staff, they will say it’s very rewarding to see the before and after version of their books. The PetroLedger team is a set of superheroes that transform and correct your data to better serve your organization.