Sales Allocations in Upstream Accounting: Increase Accuracy, Speed & Control
Navigating sales allocations in upstream accounting can seem like working through the world’s most complex sideways organizational chart. With various owners who own various percentages of various numbers of wells, the opportunities for errors are endless. Sales allocation calculations aren’t just complicated; they’re critical. Oil and gas operators must have an accurate, timely, and reliable way to allocate sales or face significant financial consequences.
Why Sales Allocations are So Complex in Upstream Oil & Gas
The upstream oil and gas industry’s ownership structures read like a tangled web of interdependencies. A single well might have dozens of working interest owners, each entitled to their precise share of production revenues minus their portion of expenses. Layer in non-operated interests, overriding royalties, and varying decimal interests across multiple wells feeding into common sales points, and you’ve got a mathematical puzzle that would confuse even the most seasoned of accountants. Add the complexity of different product streams—oil, gas, NGLs—each with its own pricing structures and purchaser agreements, plus the need to track volumes through gathering systems where production from multiple wells commingles before reaching sales meters. When federal and state regulatory requirements demand accuracy down to the decimal point, there’s zero room for error in these mission-critical calculations.
The Hidden Cost of Manual Sales Allocation Workflows
Successful sales allocations start with current and correct production data. In an ideal world (or with a field data gathering platform like W Energy), that data would exist digitally in real time. More often, it comes piecemeal from a wide range of sources, from paper tickets to last month’s proportions to statements from purchasers and third-party production managers.
Upstream accounting teams not only face the challenge of receiving this data at different times and in assorted formats, but they’re typically tasked with processing the data manually. Calculations are frequently done in Excel. Sometimes the final spreadsheet is uploaded to an accounting system for the last leg of distribution, sometimes not, but in either case, the process is intricate, error-prone, and time-consuming. Allocating sales in traditional ERP systems isn’t much better, with such clunky interfaces that Excel is actually faster and easier.
There are a number of implications to the time and energy it takes to run sales allocations manually. It’s easy to make mistakes, but hard to identify where the mistake happened. This introduces delays that result in working nights and weekends, or worse, distributing payments late or inaccurately, leading to PPAs in the following months. In turn, this negatively impacts business financials as well as relationships with owners.
How W Energy Streamlines Sales Allocation in One Unified System
With the power of cloud-based upstream accounting software like W Energy, sales allocations can be determined with speed, ease, and accuracy.
Compile All Data Sets into a Single System
Stop wasting time customizing and reorganizing data into a specific layout in order to upload it. With W Energy, purchaser statements and other data sources can be loaded in whatever format they’re received.
Easily Visualize Allocation Networks
W’s robust allocation capabilities make it fast and simple to compile, allocate back, and trace allocations with a visual representation of allocation networks. You can clearly see each step in the process, so you can trace production numbers from the sales point to the well.
Perform Multi-Tiered Allocations in One Pass
W Energy is built for the complexities of multi-tiered allocations, a unique capability in the upstream oil and gas software industry. Instead of manually performing multiple iterations, the platform can intuitively process as many levels as necessary in one run.
Catch Issues and Errors and Rerun with Ease
If everything isn’t allocated, you can see where volumes were not allocated, and the system provides easy-to-interpret alerts and messages pointing the user to the issue. Once the issue is addressed, it’s a click of a button to rerun the allocation process and review your new result set.
Streamline Government Reporting
In addition to improving distributions, having an accurate and timely allocation process helps upstream accounting teams file taxes and reports more quickly, easily, and accurately, down to each individual well.
Scale the Allocation Process
As your business moves toward larger and more complex allocation networks and requirements, such as through M&A, the SaaS W Energy platform grows with it. It’s simple to spin resources up and down to match the evolving needs of the organization.
Reimagine the Upstream Accounting Process with W Energy
Allocating sales doesn’t have to be an arduous week-long process. W Energy’s upstream oil and gas accounting software replaces spreadsheets and calculators with modern functionality, ensuring that the right people are paid the right amount at the right time and that your business can operate with confidence. From revenue accounting and accounts payable to joint venture accounting, division orders, and more, W Energy’s unified platform gives your upstream operation unparalleled efficiency and accuracy.
Request a demo today and discover how W Energy can transform your sales allocation process from a monthly marathon into a streamlined workflow.