Lubricating Cash Flow at Superior Energy Services
The oil and gas business has a soft spot for the wildcatter, the person who goes out on their own and succeeds in the boom and bust world of energy. It also has a long history of larger companies scooping up smaller companies, particularly those that have proven themselves successful and want to cash in on that success.
Houston-based Superior Energy Services, which serves the drilling, completion, and production-related needs of oil and gas companies around the world, was particularly good at scooping up those smaller companies—and, in doing so, had built out a global business with a portfolio of services that covers everything from tools and equipment to highly-trained personnel who can simply show up at a designated site and get right to work.
Behind this single-company veneer, however, lay a more complicated reality. Superior had acquired hundreds of smaller firms but had not imposed on those firms any ham-fisted mandates about what kinds of systems they should use when conducting business. “At one point, we had well over 100 different product and service lines that basically operated autonomously,” says John Streeter, Director of Credit and Collections at Superior Energy Services. “Within these different product and service lines, multiple ERP systems existed—and multiple versions within those ERP systems.”
The problem for Superior was not simply that the company needed to maintain quite a number of unique ERP systems. There was a customer-facing downside as well: Many of Superior’s product and service lines were dealing with the same customers. Individual units within Superior were invoicing the same customers independently, which was both inefficient and time-consuming for the individual groups. This fragmented approach also had the effect of increasing the overall number of days that it took for Superior to collect payment for its services. The days sales outstanding (DSO) key performance indicator (KPI) was, on the whole, nowhere near as superior as Superior executives wanted.
“We wanted to identify some of our larger customers with higher volumes and integrate our billing and invoicing cycle with their payables and procurement groups to create greater operational efficiencies,” says Streeter. “The C-suite wanted us to reduce DSO to the shortest time possible, as DSO affects cash flows and our working capital.”
The question for Streeter was clear: How to accomplish this in the face of such a decentralized IT infrastructure?
Superior wasn’t going to centralize individual back offices. It wasn’t even going to mandate any specific approach. Instead, Streeter came up with an approach that encouraged the different back offices to standardize certain procurement and invoicing processes. This approach offered two key benefits that would be felt both by the individuals within the business units and the executives in the C-Suite: It would reduce the amount of time required to prepare and submit an invoice, reduce DSO, and improve the company’s cash posture. Key to the success of this approach was the adaption of the Actian Business Xchange (BX) platform.
The Actian BX platform offers a fully managed, cloud-based data exchange service for both buyers and suppliers. Actian BX empowers different groups within Superior to exchange and translate invoices, purchase orders, shipping notices, and other documents with its customers without regard for specific document formats or requirements. A business unit within Superior can send an invoice to Actian BX, which validates, converts, and delivers that invoice in a format that is compatible with the customer’s invoicing system. The B2B integration service available through Actian BX is flexible enough to support any ERP system in use within Superior—as well as flexible and powerful enough to support any ERP system a customer is using to ingest and process invoices. Actian itself provides an onboarding service that quickly sets up new organizations within Superior as well as any customers that agree to receive Superior invoices through Actian BX.
As noted, the benefits that Streeter’s approach offered were twofold. By standardizing their invoicing processes and using Actian BX to submit their invoices, the business units within Superior could save time and money. As those business units began to use Actian BX, they started to realize just how much time and money they could save, too.
“The folks actually doing the billing and invoicing have a lot more time,” says Streeter. “They can save between 7 and 12 days of labor per month by using this process versus continuing with their old process. That is a huge benefit.”
Indeed, Streeter found that the time savings produced a groundswell of enthusiasm within Superior. “When we first started,” he says, “most of the business units began putting up walls and showing some resistance. So, we knew we had to handle each business unit individually and get the message out to them the right way. It took a while, but when the business groups started seeing the results, people started jumping on the bandwagon and actually helped promote the venture for us. This was great, as a lot of these divisions talk to each other. We were not having to sell this approach anymore; people started coming and asking to get onboard. You’d have somebody call up who was one of the biggest resisters in the beginning—and now they were asking to be put at the front of the line.”
The executives in the C-suite who had asked Streeter to reduce DSO and improve the company’s cash position were just as excited by the results of Streeter’s efforts. “Superior saw a tremendous increase and improvement in working capital,” says Streeter, “and in our business and industry, cash is everything. Over a period of four years, DSO came down roughly 18-19%. This put us in the position of having a healthy cash balance when the next oil and gas downturn hit and commodity prices slumped. We were definitely in at least as good, if not a better position than our competitors when that happened due in part to the gains in DSO from our integration project. I think that speaks volumes about the success of the project.”