Calculate the potential financial impact ofsERP™ using your numbers.
Invoicing delays kill cash flow, so removing these delays increases available cash. For example invoicing just 10 days faster results in a $273,972 increase in cash flow for every $10,000,000 in annual revenue sold on net terms. This can be easily calculated based upon the shortcut formula (1/365 * 10 days * $10,000,000 =$273,972 ) which is proven in the steps below which are based upon the decrease in Accounts Receivable and corresponding increase in Cash .
Most oilfield transactions are on net terms, where the customer pays based upon the invoice date or invoice due date. The customer does not need to pay within terms for these calculations to hold true, but it does rely on the customer paying as he was before, based upon an invoice or due date, which is now 10 days earlier. Do not include revenue that is based upon an agreed schedule, milestone, or upon delivery in the annual revenue amount field below.
The 2nd tab can be used to estimate labor savings from the same effort involved i.e. removing the delays or automating the invoice and approval process and getting it into the appropriate person (or system) at your customer. The 3rd is an illustrative example of how to arrive at a fair value for equipment lost (when the $ amount isn’t readily available in an accounting system). These 3 tabs are few of the 21 Strategies we identified in a previous article which are still fairly applicable today.