Willem-Jeroen Stevens
View from the Top

Accounting Transparency for Oil and Gas Companies

Wed, 01/22/2014 - 12:57

Transparent is a Dutch-based accounts payable data mining company that specializes on analyzing the back office financial procedures of companies in several industries, including oil and gas. “Since accounts payable is just a support area, it is often neglected as companies do not think it will create any problems. However, we understand that some aspects can go wrong, and that is where our services come into play,” says Willem-Jeroen Stevens, CEO of Transparent. Under a no-cure no-pay policy, which means that the company’s earnings are contingent on the impact of its service to its clients’ bottom line, Transparent scrutinizes its clients’ bookkeeping and carries out a range of paperless evaluation processes to diagnose their financial condition.

“The main benefit we offer comes in the form of identifying, verifying, and recovering lost working capital,” says Stevens. By following all accounts payable transactions, Transparent is able to find ways to add liquidity to help clients maintain a healthy cash flow and acid-test ratio. The company offers a service based on the unclaimed property law derived from the British legal system. “This law specifies that any unallocated money that belongs to a given account must be transferred to the state,” Stevens explains. This is a common practice in over 80 countries, including Australia, the US, Netherlands, and the UK. It has only rarely affected the Mexican oil and gas industry, specifically when PEMEX’s budget was not fully utilized in a given calendar year. “Transparent strives to find its clients’ unclaimed property to keep it out of the hands of the government,” says Stevens. With PEMEX turning into a productive enterprise of the state, this type of service could help to streamline its budget management practices. However, Henk Keizer, General Manager of Transparent Mexico, strikes a note of caution before anticipating a major deal. “In the case of PEMEX, this process could take a while, since we would really need to dive into the company’s accounting and do an in-depth analysis. This can mean quite a big business though. For example, the US government is sitting on top of US$50 billion that is not theirs.”

“Usually, PEMEX’s payment process starts with the supplier sending an invoice to the collections department. The supplier then goes online to check if the invoice has been received and approved for payment. Once the approval is given, the supplier still has to wait at least 90 days to be paid, according to the terms of payment and the clauses in the contract,” says Stevens. “To provide them with additional liquidity, Transparent offers a service through which the supplier can be paid immediately by simply clicking a ‘Pay Now’ button on the webpage.” As any factoring contract, this service includes a commission that is deducted from the full amount of the contract. This is the price to pay for receiving immediate cash, instead of waiting for the payment’s due process. “Our financing body then pays the supplier the full amount minus the commission, and after 90 days, PEMEX pays us as the owners of the contract, while receiving a small percentage of the deal from us as a commission.” The liquid cash support provided helps companies meet short-term payment commitments and keep their operations flowing.

Based on its data mining capabilities, Transparent is able to draft a grid of who has been paid over a period of time, how much have they received, and if the transactions have been accurate or not. Through its Transparent Continuous Monitoring (TCM) service, the company protects its clients from overpaying. This service is of particular interest to Mexican companies that are necessarily on the look-out for frauds and scams. “It is complicated to find indications of fraud by just looking at the end of the process as we only see the payment stage. However, we have developed a good line in detecting and providing reports about small suspicious activities and fraud-like operations,” says Eric Van Marle, VP of Global Sales and Marketing of Transparent. Besides the operational and financial benefits that Transparent brings to the table, the company also prides itself on providing advisory and benchmark services. This gives its clients a reasonable notion on how they are doing in terms of transparency, compared to their peers, and how to improve their standing. “We have a lot of experience doing this around the world, especially with oil and gas companies like Shell and Heerema,” says Stevens.