Calculate the potential financial impact ofsERP using your numbers.
Most of us have seen the negative impact in cash that results from invoicing delays and know the drain on cash can become severe if the delays are prolonged. Fortunately the reverse is also true when companies remove the delays in invoicing, and are able to legitimately generate and date their invoices days earlier.
The customer does not need to pay on shorter net terms, for these principles and calculations to hold true. For example, whether a customer pays typically 4 or 45 (or any number of days) after the invoice date or due date, the increase in cash from invoicing 10 days quicker remains the same, given everything else remains unchanged. By reducing the time you allow internally (which is under your control) for your services, equipment usage, consumables, and fees, as recorded on the field tickets, to be properly recorded on the invoice(s), priced, approved, coded with proper AFE , well, or other codes required, along with the supporting field ticket, delivery tickets, pictures, and inspections docs attached or a part of the file in the manner specified by the operator, invoice dated, and into the right system (or right hands) at the customer’s end, the increase in cash balance can occur. Presuming the customer continues to pay as he has before, say 45 days late after either the invoice date or due date, which are both now dated 10 days earlier, the increase in cash as calculated below holds true.
We have provided below 2 separate ways to calculate the increase in cash by entering 3 variables. You can see that they both generate the same result, supporting the fact that there is no “fuzzy math” in the equations. You can plug many different sets of numbers to see the impact of many different scenarios.
Removing just 10 days from the time it takes to invoice for work performed, increases cash balance, by $273,972 for every $10,000,000 in annual sales that are invoiced via net terms (presuming everything else remains the same.)
The 2nd tab can be used to roughly estimate the labor savings that can result from automating the invoicing process, based on the numbers you enter.
These 3 tabs below show 3 of the 21 Strategies we identified to help improve the performance of oilfield service companies and help them to survive, and even emerge stronger during periods of lower activity.