Need For An Advanced Spend Analytics
Oil and gas industry is a highly dynamic one, where it becomes extremely tough for even the most experienced financial controller to do proper budget allocation and monitoring. The challenge becomes even tougher when financial managers have to manage multiple sites at different geographic locations. The need of the hour is an umbrella approach to problem-solving, where each and every problem of the organization can be addressed with one single technology dashboard. Oil and gas industry is a highly capital intensive one, which demands planning to the last detail, in terms of finances or resource allocation. The nature of the industry is such that the effects will not be felt before the event has snowballed into a catastrophic one. This is where advance capabilities of vendor spend analytics is an absolute must-have for oil and gas sector.
Need Of An Early Warning Financial System To Eliminate Any Project Uncertainties
It has to be kept in mind before the start of any project that each and every action is in line with organizational policies. There should be no deviation between plan budget and spending for project processes. The need of the hour is a credible early warning system, which would alert the managers of incoming financial threat. This is done with the help of oil and gas vendor spend analytics, which acts as the trigger for possible financial roadmap deviation alarm. For humungous projects like oil and gas, it is very important to keep track of vendor-related expenses, so that in the actual accounts payable does not exceed the allocated budget. The natures of oil and gas projects are such that it is filled with lots of hidden costs, which goes unaccounted for. At the end of the project lifecycle, these costs add up to be a sizable portion of the eaten away profit.
Therefore it is important to have the leverage of software, which can drill itself down to the last component of the supplier’s invoice and tally the same with stores for GRN (goods receipt note) and in the process verify the project area where it is used. Oil and gas vendor spend analytics is used to obtain a clear relationship map between purchase requisition, purchase order and GRN. Purchase department of oil and gas organizations are particularly keen to know their top suppliers by the book value. This ensures proper monitoring of suppliers and gives them proper vendor quality rating. To formulate any cost-saving strategy, it is important to have a clear distinction between CAPEX and general expenditure. Advance vendor spends analytics are used to segregate between cost centers and profit centers. Identification of these will ensure better financial governance and optimum resource allocation.
An independent study shows that procurement managers around the world have just over 50% clarity of the overall organizational spending. This is detrimental to the long run project success, which demands in-depth cost component analysis. It is necessary for the purchasing department to clean and classify purchase data for better clarity of incoming material and its efficient usage. To make everybody concerned, accountable in the expenditure of the organization, the need of the hour is a technology by virtue of which everybody from field staff to purchase manager has the access to information about expenses. With advance vendor analytics any vendor material or invoice discrepancy can be quickly arrested at source and course corrected at once.
Purchase officers should get to know about any exceptionally high process item being incoming in the project site. There has to be a proper workflow analysis, to judge the health of the project. The trick is to find a technology partner who would be able to understand the requirement of the organizations. It is necessary for the technology partner to conduct a detailed system requirement study, which will bring out the special requirements of the organization. They should design a vendor spend analytics system which is role-based and has an admin mode to establish better control over the day to day work. The system should have alerts and notifications for better spend monitoring. It is also important for the organization to have a spend analytics system which can be easily integrated with the organizational legacy system. While the system starts up, care should be taken so that not a single amount of data loss should take place.