JKX Oil & Gas
Company: PS FinancialsCustomer: JKX Oil & GasSubmitted by: The itpr PartnershipDate: Spring 2002JKX Oil & Gas’s chosen finance package equips it to survive and evolve in a fast-changing – and occasionally hair-raising – business environment.JKX Oil ; Gas plc has the knack of spotting the less obvious, more profitable, opportunities in its business of fossil fuel exploration and production.
Now the company has repeated the pattern in the accounting systems arena: by looking beyond the few packages that traditionally dominate its sector, it has found itself a far more cost-effective and appropriate solution. JKX’s Group Financial Controller Sue Rivett says, “In PS Financials we have a flexible tool that makes it easy to get at our information in whatever format we need. We can do all that, and run the system, without any specialist IT resources in-house.”A recent episode illustrates the high-risk nature of the business. In 2001, JKX was catapulted into the headlines when a Ukrainian corporate entity attempted to seize some of its assets.
A personal intervention by Prime Minister Tony Blair helped JKX to regain control safely.With a proportion of its assets in an environment like this, JKX opted for the strategy of further diversifying their interests. The company has acquired and is developing licence areas in Italy and the US in addition to their existing licence areas in the former Soviet Union. JKX must also keep tabs on exactly what’s going on in the business at any given moment. It therefore needs a financial system that can firstly accommodate structural change readily and secondly provide management information that’s bang up-to-date. Fortunately, PS Financials is exactly that kind of system.
CHOOSING PS FINANCIALS
PS Financials was awarded the JKX contract in December 1999. It was one of the systems changes implemented by Sue Rivett, who joined JKX as their group financial controller in November 1999. At that point there were twenty five companies in the Group, which between them were using three different PC based systems. “Consolidations and monthly reporting were a difficult and time-consuming task. So my first project was to source a new consolidated system.
“Having a strong background in the oil and gas industry, Sue Rivett was already familiar with the more obvious choices. “I felt that their kind of ‘modularity’ would work against us,” she says, explaining that some systems’ modules are imperfectly integrated so that they have to be updated by monthly batch runs. “We wanted something that would, for example, allow you to input a purchase invoice and have the changes reflected in the ledgers immediately. Otherwise, information is only fully up to date once a month, if then.”There was also a feeling that those systems were too unwieldy for a company the size of JKX.
It neither had nor wanted a specialist IT department, and so the preference was for a system that was simple and reliable enough to be looked after by the finance team themselves.Accordingly, Sue Rivett and her colleagues decided to look at some of the newer systems on the market. PS Financials was not on the initial shortlist but a well-timed sales call led to a demonstration that changed the team’s thinking. “We were especially impressed by the seamless integration between different parts of the system – when you process a document such as an invoice you can see within seconds how it affects the ledgers. And you can drill right down from a summary figure to the individual document.” What clinched the deal for PS Financials against its nearest competitor, though, was the strong support and development backup.
“We felt there was a strong team behind it: a genuine commitment to driving the product forward.”
A RECORD-BREAKING IMPLEMENTATION
JKX decided on PS Financials in early December 1999. This was a mere four weeks before the company’s year end, but the finance team made a bold decision to get the new system in time for the new year. “I think even the PS Financials people thought we were being ambitious, but a big push on both sides got everything done in time.” At the end of four weeks, JKX was live not just on the core financials but also on PS Financials’ purchasing add-on.
Much preparatory effort went into designing a chart of accounts that would accurately reflect the company’s make-up. JKX wanted a six-level structure with companies consolidated at the level of “subsections” as well as at group level. That objective was achieved by using different segments of the account code – for example the first three characters of the code denote the company, and the next six characters the subsection. “One of the selling points of this system is the flexibility of the chart of the accounts at various levels,” comments Sue Rivett. “There were times when I started to think ‘, this is too simple’, but the structure worked.”While the financial team was designing the chart of accounts, PS Financials’ technicians collaborated with JKX’s Liz Sharma to install the software and load legacy data.
This collaboration also served as a skills transfer exercise, at the end of which Liz Sharma, a psychology graduate with a talent for IT, was in a position to run the system single-handedly. (She fits this work in alongside her main job of treasury management and technical administration.) Also in parallel, a team from PS Financials partner, Cognos, developed a suite of management reports to complement those that came with the system.The whole exercise required only about ten days of chargeable consultancy – a far cry from the implementation projects associated with large products that can take months, or even years, of effort and double the cost of the product.
BUSINESS BENEFITS
The new system has taken over the drudgery of consolidating the twenty five companies. “Now we can run off our group accounts within five minutes, and check everything back to the ledgers in a few minutes more,” says Sue Rivett.
“Before we had this system, that process would have taken at least a day.””The other big advantage is that if we do spot something that needs changing we can correct it with a single journal and have the change instantly reflected in every report. Before, we’d have had to fix the problem in several places and possibly repeat the whole consolidation process.”The result is that the finance team is spending its time far more rewardingly, with a focus on management accounting rather than financial accounting. “Thanks to the system, we can do what we should be doing: producing management information, reviewing results, highlighting areas that need attention.” Each month the team produces a management report pack containing forecasts, budgets and variance analyses – a job that there was far less time for before.
The company is also benefiting from information that is more timely, and reflects the current situation rather than providing a snapshot as at the end of the previous month. “We can pull off virtually any information in a couple of minutes. Being able to track big-ticket items easily is invaluable too.”The flexibility of the systems’ approach to company structure has also paid off. As part of it risk management strategy, JKX has increased geographical diversity, and that has meant restructuring the chart of accounts.
“With 700 nominal accounts per company, that could have turned into a full-time job, but with PS Financials it was simply a 10-minute import,” says Liz Sharma.
BUILDING ON EARLY SUCCESSES
JKX certainly can’t be accused of resting on its laurels since the initial implementation. It is continually finding new ways to exploit the system and the information in it. Current plans include further automation of the production of management information. By exporting information directly from PS Financials to standard office automation tools such as Microsoft Excel, it will be possible to eliminate most re-keying. JKX is also considering exploiting PS Financials’ ability to deliver management information to users over an intranet in lieu of the monthly report pack.Although self-sufficient with respect to the day-to-day care of the system, JKX is in regular contact with PS Financials for support and consultation about future developments. “Although we’re not one of their biggest clients, we always get treated as if we’re important. They listen to what we want,” says Sue Rivett.
A LIVING SYSTEM
As Sue Rivett points out, small oil and gas companies often feel they should stick with the same products as their bigger counterparts. That leaves many using a system that’s too large and cumbersome for their needs, and some complaining of an imperfect balance of power between them and their software vendor.By choosing a less obvious solution, JKX has avoided these pitfalls and secured a better match for its requirements. As Sue Rivett puts it: “Rather than a huge set-up that takes months to upgrade, we’ve got a living system that can evolve continually to suit our needs. Other companies might do well to look beyond the obvious; it’s certainly paying off in our case.”
