Cash flow can make or break a business for field service providers. Yet, for many, a significant barrier to achieving healthy cash flow lies in the time it takes to get paid for services rendered in the field. This challenge is especially pronounced in industries like oilfield services, where customers and operators impose intricate and unique requirements for verifying work before releasing payment. These requirements can range from obtaining signatures, stamps, or coding on field tickets to attaching supporting field or delivery tickets with images, all delivered through designated portals.
The Struggle of Manual Billing
The manual billing process is akin to navigating treacherous waters in an age when streamlined operations are the lifeblood of success. Let's take a deeper dive into the challenges posed by manual billing and how automation offers a lifeboat to struggling businesses.
Deciphering Handwritten Field Information
Field service providers often find themselves grappling with handwritten field information. These notes, while valuable, can be notoriously hard to read and interpret. Translating them into an understandable format is not only time-consuming but also prone to errors.
Data Entry Issues
Once deciphered, the field data must be meticulously entered into internal invoicing systems. This step alone can consume countless hours, especially when dealing with a high volume of transactions. The risk of data entry errors looms large, potentially leading to invoicing discrepancies and customer disputes.
Cross-Referencing Complex Agreements
The complexity of customer agreements is another hurdle. Billing teams must cross-reference pricing and service agreements to ensure accurate invoicing. Any deviations from these agreements can lead to disputes and delayed payments.
Crafting Invoices From Scratch
Creating invoices from scratch using programs like Word or Excel is a labor-intensive process. Each invoice requires painstaking attention to detail to ensure compliance with customer-specific requirements. This manual approach not only increases the risk of errors but also consumes valuable time that could be better spent on strategic tasks.
Uploading to Customer Portals
Many customers and operators insist on invoices being uploaded to their designated portals. This requirement necessitates extra steps, often involving additional data entry and document management. Failing to meet these portal requirements can result in payment delays and frustrated customers.
The Promise of Automation
Thankfully, for most oilfield service providers, the solution lies in automating the invoice and field ticket preparation and delivery process. Despite skepticism from some quarters about the material impact of automation or concerns about the complexity of their billing processes, the reality is that automation can be a game-changer. CBSI's ofsERP® extension for Microsoft Dynamics 365 Business Central Essentials has demonstrated remarkable success in automating billing processes, from the simplest to the most intricate.
Demonstrating Financial Impact
In this blog post, we will dive into the financial aspects of automating the invoice preparation and delivery process. We'll prove that shaving days off this process can lead to a tangible increase in cash on hand. We will accomplish this by examining changes in the Accounts Receivable balance.
Consider the following gains for your business:
Reduced Operational Costs
One of the immediate financial benefits of automation is a reduction in operational costs. With manual processes, you often need a larger billing team to handle the workload. Automation streamlines tasks, allowing you to allocate resources more efficiently and trim unnecessary overhead expenses.
Faster Payment Collection
Automation accelerates the entire invoicing and payment collection cycle. Invoices are generated quickly and accurately, and they reach your customers without delays. This efficiency translates into shorter Days Sales Outstanding (DSO) periods, meaning you get paid faster, bolstering your cash flow.
Fewer Billing Disputes
The accuracy and consistency offered by automation mean fewer billing disputes. When your invoices align precisely with customer agreements and expectations, there are fewer reasons for customers to dispute charges. This leads to smoother transactions and fewer delays in receiving payments.
Improved Resource Allocation
Automation frees up your team's time and energy, allowing them to focus on strategic activities that drive growth and innovation. With fewer hours spent on manual data entry and invoice creation, your team can engage in more value-added tasks, ultimately enhancing your competitive edge.
Enhanced Forecasting and Planning
The predictability and reliability of automated processes provide a solid foundation for financial forecasting and planning. With real-time access to financial data, you can make informed decisions, allocate resources effectively, and seize growth opportunities with confidence.
Figures 1 and 2: A Closer Look
Figures 1 and 2 serve as our guides, utilizing a fictitious company with $30,000,000 in annual sales, of which $28,000,000 is sold on net terms. Both figures illustrate three scenarios: reducing the invoice preparation and delivery process by 5, 15, and 25 days.
Figure 1: A Financial Perspective
Figure 1 showcases a financial perspective, highlighting that in an environment where the time to prepare and deliver a proper invoice can be reduced by 15 days (typical in the oilfield service industry), the Accounts Receivable balance decreases from $5,000,000 to $3,849,315, a credit of $1,150,685. To maintain financial balance, this credit needs an offsetting debit - which can reasonably only be the asset, cash on hand.
This simplified scenario underscores a fundamental principle - that the increase in cash is indeed substantial when the invoicing process is optimized. It's not just about saving time; it's about securing financial stability and positioning the company for growth in a highly competitive industry.
As we continue our exploration in this blog post, we'll uncover more insights into the practical benefits of automation and provide you with the tools you need to evaluate its impact on your own operations. In the world of field service, every day counts, and every dollar saved is a step towards a stronger, more resilient business.
Figure 2: A Shortcut to Success
Figure 2 unveils a powerful shortcut—a mathematical formula that simplifies the process of calculating the increase in cash flow resulting from automation. What's remarkable about this formula is that it doesn't require the intricacies of Accounts Receivable balances. Instead, it relies on a key metric—the increase in cash on hand, expressed as a percentage of sales sold on net terms.
This approach streamlines the calculation, eliminating the need for complex financial inputs and allowing businesses to estimate the impact of reducing the invoice processing time with ease.
By adopting this shortcut, companies can gain a rapid understanding of how automation can affect their financial health. It's not just a tool for the accounting department; it's a strategic asset that empowers decision-makers to visualize the potential benefits of automation in real terms.
The Profound Impact on Cash Flow
When it comes to cash flow, the numbers tell a compelling story of how automation can revolutionize your field service business. Let's dig deeper into the profound impact it has on your financial health.
Shaving Days Off the Invoice Process
Imagine a scenario where you reduce the processing time for invoices by 15 days, while keeping all other variables constant. This common reduction period, especially in the oilfield service industry, consistently results in a remarkable boost to cash flow.
The Numbers Speak Volumes
A 15-day reduction translates to an approximate 4.11% increase in cash flow, calculated as a percentage of sales made on net terms. Simply put, for every dollar of sales conducted on net terms, a 15-day reduction equates to a 4.11% surge in cash flow. It's not just a marginal improvement; it's a substantial financial transformation.
But the beauty of this principle lies in its adaptability. Whether you're considering a 5-day reduction, which still yields a notable 1.37% increase, or an ambitious 25-day reduction, leading to a remarkable 6.85% cash flow boost, the message remains clear—automation has a tangible and direct impact on your bottom line.
A Strategic Move for Financial Security
In an industry as dynamic and competitive as field service, securing your financial future is paramount. Automation isn't just a buzzword; it's a strategic move that holds the potential to fortify your financial security in the face of unique industry challenges.
More Than Efficiency: Strategic Advantage
Automation transcends mere efficiency. It is the linchpin of your financial strategy, a means to safeguard your business against the uncertainty and volatility that often define field service industries. It's not just about staying current with industry trends; it's about taking charge of your financial destiny.
Concrete Results, Real Benefits
The impact of automation is not hypothetical; it's tangible and backed by real-world results. By embracing automation, businesses can experience significant reductions in operational costs, faster payment collection, fewer billing disputes, and improved resource allocation. These aren't just buzzwords; they are real benefits that bolster your financial security.
Unlocking Your Full Financial Potential
Automation isn't an accessory; it's the key to unlocking your full financial potential. It empowers you to optimize your operations, streamline your processes, and gain a competitive edge in a challenging landscape. It's a strategic move that positions you for long-term success and growth.
Join the Financial Transformation
So, why wait? Join the financial transformation by embracing automation. Discover how CBSI's mission-central software can empower your business. Check out our CBSI blog today to learn more about how our innovative solutions are designed for the benefit of our clientele. Don't just adapt to change; lead it. Secure your financial future with automation.