By Victoria Varner, Senior Vice President and Sales Consultant, Energy Group, Wells Fargo Treasury Management
In oil and gas country, business tends to run at its own pace. You’re either working a 100-hour week just to keep up, or you’re impatiently counting the days until you “hit it big” and can take action.
In either case, your investors, your working-interest partners, your employees, and your suppliers all count on you to minimize risk and maximize profits. That means efficiently handling everything from purchasing equipment to cutting royalty checks to executing payroll.
Optimize your capital and improve your expense management
When you involve your financial institution, you can develop a sound strategy to maximize your investments and keep your operational expenses in line. Working with the right payables, receivables, and liquidity solutions can optimize your working capital, improve your efficiency, and reduce your risk.
Here are six core solutions to put in place now, to support your energy operations:
- Maximize idle cash. Millions of dollars of investment capital shouldn’t just sit in your accounts. But when it may be two weeks, two months, or two years until you’re up-and-running or ready to make an acquisition, it can be difficult to find an investment vehicle that’s flexible enough for your needs. An automated overnight investment sweep can help you get more out of your collected balances. You determine target balances and your ideal ratio of investments-to-cash liquidity, then leverage up to 100 percent of your excess funds to invest, minimize interest, or pay down debt — without sacrificing liquidity.
- Streamline payments in the field. Making payments with purchase orders, checks, or cash can tax your limited internal resources, drive up processing costs, and impede your visibility to expenses. Commercial cards provide a convenient electronic payment method that you can use to make purchases, pay supplier invoices, and support employees in the field. Customizable controls and robust transaction data make it easy to monitor expenses, adjust card limits, and mitigate fraud or misuse.
- Improve daily cash forecasts. Upfront expenses on a new well can be expensive, and fluctuate widely from day-to-day. Recipients who delay deposit of their royalty checks can make it difficult to accurately forecast your cash and limit your earning potential. A controlled disbursement account arms you with an accurate daily cash position every morning, so you can make smart money management and short-term investment decisions. You fund your account with only the necessary balance to cover daily check disbursements.
- Optimize royalty payments. Royalties are a necessary part of doing business, but their intense regulatory requirements and specialized process can strain your in-house resources. Outsourcing the issuing, printing, and mailing of royalty checks (and their accompanying statements) can free up your staff for core business activities, while ensuring timely revenue payments.
- Protect against unauthorized transactions. The frenetic pace when launching a new site or preparing for a merger or acquisition often leaves little time or resources to monitor your accounts for suspect activity. Fraud protection solutions for checks and ACH transactions provide an automatic and cost-effective shield for your payables and receivables accounts, allowing you to do business with confidence. Your staff uses a secure online portal to quickly review and make decisions on suspect items.
- Expedite deposits. Whether you process a handful, or hundreds, of checks each month from working-interest partners, lockbox and remote deposit capture solutions can accelerate your cash flow, streamline reconciliation, and eliminate tedious trips to the bank. Both offer extended deposit windows, check-to-ACH conversion, and digital check archives for record-keeping and research.
No matter where you are at in your exploration and production cycle, working with a recognized bank that brings strong industry experience and a dedicated energy team can help you tackle today’s challenges — and prepare for tomorrow’s opportunities.
About the author: Victoria Varner, Senior Vice President and Treasury Management Sales Consultant, Energy Group, for Wells Fargo, is a certified treasury professional with more than fifteen years’ experience in the energy industry. Based in Houston, Texas, she works with energy companies around the country. She holds bachelor’s and master’s degrees in international relations from the Universidad de Belgrano in Buenos Aires, Argentina, and is a member of the Women’s Energy Network, an organization that brings together professional women of achievement in the energy industry