Procure-to-Pay

Procure-to-pay integration is where oil and gas accounting software earns its operational value. The AFE approval chain, the joint-interest cost split at the invoice level, and the allocation between capital and operating costs all live in the P2P workflow — and each one has downstream effects on JIB accuracy, royalty calculations, and financial reporting.

Why P2P is harder in O&G accounting software

AFE approval and budget control. Every capital purchase must be authorised by an AFE and stay within its approved budget. In O&G accounting software, the PO creation step prompts for the AFE number and checks remaining budget before allowing the PO to be issued. Invoices that arrive without a matching PO — common with oilfield contractors who work on verbal orders — require a retroactive PO process that accounting teams consistently cite as one of their biggest month-end headaches.

IDC versus tangible cost classification. When drilling cost invoices arrive — for bits, casing, cement, and completion equipment — the accounting software must classify each line item as intangible drilling cost (IDC) or tangible equipment. IDC is expensed for tax purposes in the year incurred; tangibles are capitalised and depleted over the productive life of the well. The software should automate this classification based on expense codes, not require the AP clerk to make the determination on every invoice line.

Working-interest cost allocation at the invoice level. For wells with non-operating partners, the cost of every vendor invoice needs to be split to each partner's decimal interest when it's posted. Doing this at the invoice level means the JIB statement accurately reflects the month's actual billings. Doing it as a month-end batch allocation — which some general-purpose accounting software does — creates reconciliation risk and makes disputed JIB charges harder to trace back to the source transaction.

Accruals for services in progress. At month-end, some wellsite services will be in progress and not yet invoiced. O&G accounting software needs an accrual process for wellsite services and rental equipment — the accrual posts the estimated cost to the correct lease and AFE, with automatic reversal when the actual invoice arrives. Without this, month-end LOE (lease operating expense) is understated and the LOS doesn't reflect the true cost of operations.

P2P workflow in purpose-built O&G accounting software

In Wolfepak, Quorum, and Enertia, the standard P2P workflow is:

1. Purchase order created with AFE, lease, expense code, and working-interest allocation
2. AFE budget check — PO is blocked if over budget; supplemental AFE approval required
3. Vendor invoice received and matched to PO (three-way match or service confirmation)
4. Cost allocation — invoice split to working-interest partners automatically at posting
5. IDC/tangible classification applied by expense code
6. AP posting to GL with full cost-code and AFE detail
7. Payment by check or ACH to vendor with remittance detail

The breakdowns in this flow — retroactive POs, manual IDC classification, month-end batch allocations, missing accruals — are what O&G accounting software implementations are designed to fix. They're also where the audit trail breaks down, which creates problems during IRS audits and state severance tax examinations.

Evaluating P2P in O&G accounting software

When evaluating O&G accounting software for P2P functionality, ask vendors: How does the system handle invoices that arrive without a PO? Can the AFE budget check be configured to warn versus hard-block? How are working-interest cost splits applied — at posting time or at month-end? How does the system handle field-ticket-based service invoices from wellsite contractors?

The answers reveal whether the software was designed by people who understand oilfield operations or adapted from a generic accounting platform.

Book an assessment to review your current P2P workflow and identify the gaps that purpose-built O&G accounting software would close.