Cimarex outsources check printing and converts 400 suppliers to commercial card payments
With the dynamic swings that oil and gas companies often experience, lean and efficient operations are a must. Sherri Nitta, Treasurer for Cimarex Energy Co., helped her company streamline its accounts payable processes through automation, outsourcing, and greater electronic payment volume — all while leveraging the existing ERP system.
As a result, Cimarex was able to handle growth without adding head count in finance or straining IT resources, and the company was better able to position itself to withstand economic downturns. Simultaneously, offering more payment options helped strengthen relationships with the company’s suppliers, investment partners, and royalty recipients.
“We’re proud of the fact that we’re up to date and best in class, considering we don’t spend a lot of money on these functions,” Nitta stated.
She added, “Our suppliers are getting paid the way they want to be paid. That’s just the expectation in this day and age, that a company our size should be able to offer these choices. We were happy to be able to deliver.”
Moving beyond checks and clerical tasks
Cimarex is an independent oil and gas exploration and production company with principal operations in the Permian and midcontinent areas of the U.S. Nitta leads a treasury management staff of four from the company’s headquarters in Denver. Her team handles daily cash management, investing, and borrowing, as well as overseeing corporate insurance, payroll, and benefits accounting. A separate operational accounting department based in Tulsa, Oklahoma, manages the company’s royalty payments.
Together, the two functions process approximately 15,000 payments each month, split evenly between supplier invoices and royalty recipients. The numbers climb even higher — upwards of 30,000 monthly payments — when Cimarex releases its suspended royalty payments once per year.
Handling this volume as checks overwhelmed the treasury and accounting teams. Once a month, for royalty payments, everyone needed to pitch in with printing, collating, envelope stuffing, pulling special handling requests, and weighing finished packages for postage. Cimarex had the added expense of maintaining check printing equipment at both their Denver and Tulsa facilities.
“In Denver, check printing ended up being the primary function of our three treasury clerks,” Nitta recalled. “We were doing three check runs a week, so there were three days each week when a clerk was spending time on a check run.”
Royalty payments from the Tulsa office took even longer, due to the lengthy statements required for state compliance. Nitta estimated it took 70 to 100 hours each month to execute royalty checks and statements in-house.
“This involved 12 to 15 people spending two to three hours each just to collate checks and stuff envelopes,” she recalled. “These were trained accountants — professionals — doing this clerical work. It was just crazy! It was a good process to get rid of.”
Payment choices — not a mandate
By 2013, Cimarex was ready for a change. Nitta issued a request for proposal (RFP) to three banks. From industry conferences, she knew that moving from checks to commercial card and ACH transactions was part of the solution, as well as outsourcing their remaining check printing. What surprised Nitta were the various approaches that banks and other energy companies used.
“We heard different perspectives from other treasurers, but we definitely wanted to do this the Cimarex way,” Nitta explained. “Some companies were pretty extreme, forcing their vendors to accept one type of payment, and that’s just not us. We want to be a good partner for the people we do business with, and we want to maintain choices.”
For supplier payments, it was essential to work with a bank that could manage the onboarding process yet still convey the Cimarex tone. For royalty payments, Cimarex wanted a provider with industry experience and a fully developed process. They also needed electronic payment solutions that would integrate easily with their existing ERP system.
“What decided it for us was the onboarding process,” Nitta recalled. “One of the banks wanted us to do our own onboarding — that was a no-go. Wells Fargo would handle onboarding as part of the whole implementation process, so it made it a pretty easy decision.”
Working together, Cimarex put in place an efficient, end-to-end solution with Wells Fargo. Staff in Denver and Tulsa maintain their existing work flow for routing and approving payments in the ERP system, then upload a single file of check, ACH, and commercial card transactions to Wells Fargo, using the Payment Manager® service. Wells Fargo executes the electronic transactions, then prints and distributes the remaining supplier checks, royalty checks, and royalty statements.
“For all practical purposes, it’s automated — and yet we didn’t have to buy a new system,” Nitta stated. “All we needed was a little bit of IT assistance to download information to our ERP system and upload to Wells Fargo.”
Supplier enrollment exceeds expectations
Contacting the company’s suppliers to accept electronic payment was a critical component of the project. Wells Fargo first analyzed Cimarex’s current suppliers, then forecast card and ACH acceptance targets. Nitta doubted that the large enrollment goals were achievable — especially since Cimarex did not offer special payment terms or incentives for electronic acceptance.
“The best way to describe our initial reaction was skeptical,” she recalled. “It was a big number they said they could convert — and we were pleasantly surprised that we actually exceeded our expectations.”
Today, after three Wells Fargo campaigns, Cimarex has migrated nearly 400 suppliers and $175 million in volume from checks to commercial card.. Wells Fargo handled the communications, using letters and call scripts customized by Cimarex.
Their initial campaign in 2013 onboarded 181 suppliers for commercial card payments. A year later, after company growth, a second campaign targeted new suppliers and offered ACH as an alternative for those who had previously declined card payments. A third campaign is now underway.
Cimarex attributes their success to their partnership approach with suppliers, the convenience factor of card and ACH payments, and Wells Fargo’s onboarding expertise.
“We got a much better result by using Wells Fargo,” Nitta said. “It would be a very time-consuming process on our own — time that we don’t have. The other part is getting to the right person within a company, and Wells Fargo has that expertise. They know how to get to that right person and what to say, so I know that if we had attempted to do this ourselves, we would not have had the same success.”
They also walked away with new insight into their supplier base that helped refine and improve future enrollment efforts.
“We thought we knew who the interested suppliers would be, and we were totally wrong,” she admitted. “Our small oil and gas service companies just jumped on the opportunity to get paid by card. I think it’s because it’s more convenient for suppliers.”
Greater efficiency, better support of the business
Cimarex still issues tens of thousands of payments each month, but two-thirds of the dollar volume is now paid electronically, and approximately one-third of monthly transactions are now electronic.
Outsourcing the remaining supplier and royalty checks provides an even bigger win for Cimarex. Treasury and accounting staff no longer spend valuable time on tedious clerical tasks. Even with company growth, Nitta was able to reduce head count in her department. With the more efficient check process, they opted not to replace a full-time position when a treasury clerk retired.
At the same time, treasury has expanded its service to the business by adding a fourth check run each week.
“Even though 68% of supplier payments are still checks, overall only 1% of those are printed by us in-house,” Nitta explained. “We’ve gained tremendous efficiency by outsourcing them. We went to printing checks four days a week, but it takes less of our time, and it gives our accounting folks some flexibility.”
Up next for Cimarex are similar enhancements to streamline and automate their accounts receivable processes, and continued efforts to expand their electronic payment volume. Nitta appreciates Wells Fargo’s support of her team and projects.
“The biggest advantage of working with Wells Fargo is that they’re big enough to offer a full spectrum of products and services, and we’re not their only oil and gas customer,” she said. “If we come up with a challenge, they’ve already seen something similar and know how to help.”
“It’s like having additional treasury personnel in our company,” she added.
For more information, contact your Wells Fargo representative or fill out the Contact Us form on this site.