2013 Industry Outlook
Jean-Pierre Foehn, Amalto CEO
Over the past several years, the Oil and Gas industry – primarily service companies – have adopted a series of initiatives to help reduce Days Sales Outstanding (DSO) by leveraging new technologies and applications. Industry analysts have reported that DSO has been on the decline in recent years. As a matter of fact, Halliburton, one of the leading oilfield service companies, in 2010 cited the average DSO for the industry was approximately 108 days. Even if that particular DSO rate isn’t experienced by each and every service company, it is still no secret that DSO remains to be a big problem.
If we estimate that cumulated revenue for the industry is $150b per year, the cost of capital is 5% and the average DSO is 70 days, then it is safe to say that DSO is costing the industry around $1.4b each year. So, what can be done to help mitigate DSO?
For oilfield services, DSO stems from two inefficient processes pertaining to field ticketing and invoicing. One can estimate that from an average DSO of 70 days, often times field ticketing can take up 20 to 30 of those days while invoicing can take up 10 days. The remaining days are generally associated with the payment terms and the payment process itself.
Electronic invoicing has become a strong trend in the industry and electronic field ticketing continues to pick up momentum each year. Clearly, the emergence of mobile devices in the field, as well cloud computing, has accelerated B2B exchanges between the service company and the operator by transitioning from a paper trail to an end-to-end digital process.
CFO’s, credit and collections directors and A/P managers alike will find that optimal efficiencies can be gained by addressing both sides of the problem – not just one piece. This is a new frontier in capital management to improve the overall profitability for the oilfield services industry.