An ERP system is designed to connect data from all major functional areas and improve an organization’s reporting capabilities. The goal is faster, better decision making by senior management aided by a current and accurate picture of the organization’s performance.
To achieve this goal, an organization must first decide what information it needs out of the system. Because many configuration parameters cannot be changed after system integration has begun, it is important to identify critical reporting requirements at the outset of an ERP implementation.
While there is no one-size-fits-all reporting model, there are a few considerations that will make or break the usefulness of your final reports:
1. Use the increased level of detail available with a new system
Understand the new capabilities of your ERP system and develop a reporting hierarchy that takes advantage of more precise revenue and expense classifications.
With a new ERP, many companies are able to increase expense categories from three to 15, allowing for a much more granular view of profitability. This allows an E&P company to parse out smaller expense classifications at each well site, like how much money is spent on vehicles.
Similarly, legacy systems often limit the definitions of cost centers to units, wells, and leases. A new system can expand these categorizations, giving management a comprehensive view of balance sheet activity. A completion can be recorded as such rather than as a well. A unit can be recorded as a legal land unit instead of a grouping of wells used for accruals.
2. Set up the reporting hierarchy to support budgeting
The hierarchy in which you book and report your revenue, production, and expenses should be consistent with the level you want to budget. Even if budgets are managed outside of the primary ERP system, actuals and basis for comparison will always be housed in the ERP.
Operations and accounting constantly struggle over reporting needs. Operations may want to view billable versus unbillable LOE, or operated versus non-operated status at a field or well level, but accounting wants to see information at a higher, aggregated level in the hierarchy. With careful planning, the hierarchy can be set up to accommodate operations’ reporting needs as well as internal and external financial reporting within the same structure.
3. Consider the company’s long-term goals and growth trajectory
Ensure the ERP is set up to support growth by cleansing data before go-live. Clean master data sets a solid foundation that can sustain the burden of additional data in the event of an acquisition.
Consider the amount of history needed for reporting. Unused or excess accounts in the Chart of Accounts (COA), properties that have been sold, or wells that have been plugged and abandoned for more than five years should not be set up in the new system.
While thinking about the future might seem like a no-brainer, companies often become so consumed with supporting current requirements that future considerations and long-term growth plans are not taken into consideration. A certain level of reporting may not be needed today, but will it be needed in the future?
Companies invest in ERP systems to improve efficiency and profitability. Developing a reporting strategy prior to implementation will ensure maximum benefit and desired outputs are achieved.
Trenegy helps companies implement a variety of ERP systems and develop reporting strategy that fits business requirements and supports long-term strategic goals.