Accounting Manager
An accounting system should make it easier to compile financial information, gain insights into day-to-day operations, and prepare the reports necessary to make informed decisions. As companies evolve, the systems that once worked well all too often become the tethers which hold them back.
Organic growth, acquisitions, increasing transaction volumes, new reporting requirements, and changes in operations or technology can all affect what an organization needs from its accounting software. In some cases, a system’s functionality may no longer provide the solutions your business needs. In others, the organization may be paying for an unnecessary level of complexity.
This is why right-sizing is so important. Choosing a new accounting system is not about finding the most powerful platform available. Rather, the goal is to find a solution that aligns the organization’s accounting software with the operational complexity, reporting requirements, technology environment, and growth plans of the business.
For oil and gas companies, that evaluation can make or break administrative costs. Joint venture accounting processes usually involve multiple entities and ownership interests who are all taking a piece of the same pie. Throw in multiple wells, each with their own ownership deck, and multiple leases within each well…you can see where the intricacies begin to pile up. Not to mention the reporting and other regulatory requirements which often rely heavily on an ERP system to compile the data. An accounting software should accommodate those requirements without creating unnecessary complexity.
There is rarely one event that determines an accounting software is no longer the right fit. More often, problems accumulate gradually, and with little fanfare. By the time management is annoyed with a system, you can bet the employees who work in it day-to-day are ready for a better solution.
When your team is performing increasing amounts of manual work, creating external processes, or otherwise circumventing the system that was made for the job just to complete routine processes, the time is nigh. Usually, reporting becomes cumbersome, data is difficult to access or manipulate, and employees turn first to workarounds rather than the ERP system. As companies change, they may find that its legacy system does not easily accommodate their new business structure, increased transaction volume, or changes in its operations.
These issues can affect more than just efficiency; they can create additional opportunities for errors, make financial information more difficult to use, and place unnecessary demands on accounting and administrative staff.
Replacing a system simply because a newer or more sophisticated option exists does not make sense, either. A more complex platform can bring higher costs, long implementation timelines, and additional training requirements for your staff. Businesses that evaluate softwares to make a change should always remain open to their current solution if another does not make more sense.
The objective should be to understand what the organization needs and then determine whether the current system can meet those needs as efficiently as its alternatives.
Once a company identifies that a change may be necessary, evaluating potential systems requires looking beyond sales demonstrations and product or module feature lists. Several factors can help determine whether a new platform will provide meaningful value in exchange for the work of a conversion.
Moving from one accounting system to another requires careful consideration of historical data. Companies need to determine what information should be transferred, how it will be structured in the new system, and how its accuracy will be validated. This requires an understanding of how historical data is leveraged for ongoing business purposes – whether for analysis and planning or required reporting.
Historical transactions, account information and documentation, ownership data, paid or suspended revenues, and other financial records likely all need to be addressed. The process is particularly involved when data has accumulated over many years or exists across multiple systems.
Data conversion should therefore be part of the evaluation from the beginning. Understanding what must be transferred, what needs to be cleaned or reformatted, and what resources will be required to do so can help establish realistic expectations for the transition.
The right system needs to reflect how the organization actually operates. A company’s size alone does not determine the complexity of its accounting environment, nor should its accounting processes dictate unnecessary complexity in operations.
For example, an organization managing multiple entities, ownership structures, joint interests, or significant transaction volumes may require capabilities that a simpler operation does not. Complexities in themselves do not warrant a more sophisticated system; management must aim to discern those softwares that simply look fancy from those that actually make their employees’ lives easier.
Oil and gas companies must consider whether a potential system can effectively support the accounting processes required by their operations. The goal is to find a platform that handles necessary complexity without forcing the organization into processes that are unnecessarily complicated or cumbersome.
Reporting needs should be another major consideration. Financial information may be required for management, owners, partners, auditors, lenders, regulators, and other stakeholders, and those requirements can vary significantly between organizations.
An accounting system should provide the reporting functionality necessary to access and present financial information efficiently. Companies should also evaluate the platform’s security, documentation, data retention, and regulatory capabilities and confirm they meet the needs of the organization.
Compliance should be top-of-mind. If a system cannot support the organization’s reporting and control requirements, additional manual processes are often required to fill the gaps.
Feature lists can provide valuable insights into a product offering but can also make it difficult to distinguish between what a company actually needs and what simply sounds useful.
Organizations should identify the capabilities that are essential to their operations before evaluating potential systems. Depending on the business, necessities may include workflow automation, sophisticated security settings, multi-entity functionality, specialized accounting capabilities, reporting tools, or data accessibility.
A longer feature list does not necessarily indicate a better system. Features should be evaluated based on whether they solve existing problems, improve processes, or provide meaningful value to the organization. Think about what features your current system has that are used daily, and what features it does not have that are often missed.
Cost is quickly becoming the most important part of right-sizing an accounting system. The price of software is only one component of the overall investment but is usually a significant portion of overall transition (and ongoing operating) costs.
Companies should consider implementation, data conversion, customizations, training, maintenance, support, upgrades, and the internal resources required to manage the system. An enterprise resource planning (ERP) platform may provide extensive functionality by connecting multiple business processes, but that generally comes with greater cost and complexity.
The question should never be whether the organization can afford a particular system; instead, it is whether the benefits and capabilities of the new system justify the total investment.
Accounting systems rarely operate in isolation; today, many accounting systems act as a hub for the ancillary softwares that help management run their businesses. Companies may rely on separate platforms for production, land management, payroll, operations, reporting, or other functions.
A new accounting system should be evaluated based on how effectively it can exchange information with the other software the organization uses. Strong integration helps reduce duplicate data entry, improve consistency, and makes financial information more accessible and relevant.
It is also worth considering future integration needs. A system that works with today’s technology environment but limits future options may become a constraint as the organization evolves. It may be easier to make the leap to a more advanced system now in preparation for future growth than to wait until growth happens and be faced with an accounting system change as well.
Right-sizing an accounting system means considering the entire financial and operational environment – not just software.
The right solution should provide the functionality necessary to support the organization’s accounting requirements, accommodate its operational complexity, meet reporting and compliance needs, integrate with other systems, and provide value that justifies its total cost.
It should also be capable of supporting the organization as its needs change. A system that is appropriate today should not become an obstacle to growth tomorrow.
For oil and gas companies, making that determination requires a detailed understanding of both the technology and the accounting processes it is intended to support. The most effective system is not always the largest or most sophisticated option. It is the one that fits the organization and enables its accounting function to effectively support the business.
Martindale Consultants brings decades of experience working with oil and gas accounting and financial processes. That industry perspective provides a practical understanding of the challenges organizations face when evaluating their accounting systems and considering a transition.
Ultimately, selecting a new accounting system is an opportunity to evaluate more than technology. It is an opportunity to determine whether the organization’s financial processes, systems, and resources are appropriately aligned with the business today and positioned to support the business tomorrow.
Fill out the form below, and we will be in touch shortly.
Fill out the form below, and we will be in touch shortly.