Why Year-End Audits are Not the Solution to Contract Compliance

The oil and gas industry is expected to do more with less, and that means every dollar counts. Even small improvements in spend, applied across the entire organization, can translate to huge savings that flow straight to the bottom line. Still, many companies rely on year-end audits to catch non-compliant invoices from suppliers. This strategy may seem effective but carries numerous financial and operational risks.

End-of-year audits require extensive labor, often pulling finance teams away from higher-value tasks. For larger E&P companies, this often means hiring third-party auditors to sift through thousands of invoices manually. These audits, performed by outside firms, are labor-intensive and expensive, charging a fee based on the amount clawed back from the supplier. Audits are time-consuming and often take weeks or even months to complete. Manual audits are also prone to mistakes, especially since the people performing the work are often external resources working with large volumes of transactions under tight deadlines.

When overpayments slip through the cracks, companies are left hoping that clawback clauses in contracts will work as intended. Unfortunately, recovering overpaid funds is rarely straightforward. Even with solid contracts, legal battles over clawbacks are common, costing time and money.

Proactive Detection vs. Reactive Recovery

Instead of waiting for mistakes to surface months or even a year after payments are made, Prolarus prevents errors before they occur:

• Real-time validation: Catch discrepancies in transactions before payments are processed.

• Anomaly detection: Identify potential issues and pricing irregularities during the AP process.

• Automated compliance checks: Ensure every invoice meets contract terms without manual oversight.

The Bottom Line: Audits Are Too Late

Year-end audits are costly and take place far too late. By the time non-compliant invoices are discovered:

• Capital has already been spent,

• Vendors may not be willing (or able) to repay, and

• You’ve spent additional resources trying to fix a preventable issue.

Prolarus saves your team from this costly cycle by stopping payment errors before they happen. In an industry where margins are tight and the invoicing process is complex, proactive validation of contract compliance isn’t just a nice-to-have, it’s a requirement.

Ready to eliminate non-compliant invoices before they drain your resources? Contact us today to learn how Prolarus can protect your bottom line.