Invoice Factoring

Delayed Dollars: The Impact of Late Payments on Growing Oil & Gas Companies

The North American oil and gas sector is on the brink of significant growth, with forecasts showing an increase in activity and investments, marking a period of opportunity. Goldman Sachs Research highlights a 25% increase in major projects since 2020. Yet, despite this positive outlook, small oil and gas companies are encountering a range of critical challenges that may restrict their ability to fully leverage this expansion.

Cash Flow Struggles Hold Back SMBs from the Growth Opportunity

Despite the optimistic growth trajectory, smaller firms in the oil and gas industry are dealing with important issues that threaten their potential. One of the most significant challenges is managing cash flow in an environment of tight lending to small businesses, late payments, and increasing operational costs due to inflation. This financial squeeze is particularly tight for small to medium businesses (SMBs) that operate with narrower margins and less room for financial maneuvering.

  • According to a QuickBooks Survey, 81% of mid-sized businesses report an uptick in late payments, a trend that’s not just a minor inconvenience but a significant barrier to growth. Companies in the oil and gas are no exception when it comes to facing this issue.
  • Further compounding the issue, The Federal Reserve notes that 49% of banks have tightened their lending standards for small firms, making external financing a steep hill to climb.

Long Terms and Late Payments: A Growing Concern in Oil & Gas

Small and medium-sized businesses in the oil and gas industry are all too familiar with the sting of late payments. This problem, deeply rooted since the early 1980s when companies like Dome Petroleum Ltd. started extending payment terms to 90 days, has become a widespread practice. Now, it’s common for certain oil companies to set payment terms for up to 90 or even 120 days—making the issue with late payments int this sector all the more problematic.These delays aren’t mere inconveniences; they’re significant barriers, impacting operational fluidity and market opportunities.

The financial strain on suppliers is considerable:

  • Most suppliers face upfront costs such as labor, fuel, and leases, accounting for 65 to 90% of direct costs depending on market conditions.
  • Back in 2014, the estimated capital expenditures in the Canadian oil and gas sector were $69 billion.
  • Assuming a 90-day payment cycle, this would mean vendors had $17.25 billion stuck in accounts receivable. 

These eye-opening figures spotlight a real problem for oil suppliers: with a significant portion of their capital locked in accounts receivable, they struggle to cover their immediate costs. 

Long net terms and late payments lead to broader financial and operational inefficiencies in the industry. This slow payment model challenges limits the ability of small and medium suppliers and service companies to seize market opportunities effectively.

Exploring the Root Causes of Invoicing Difficulties

A thorough examination of the causes behind these invoicing challenges, as revealed by a FundThrough survey, demonstrates the complexity of the issue. The survey identifies the following as the primary causes of payment difficulties:

  • Disputed or missed invoices (41%)
  • Generic delays (16%)
  • Client pressure to reduce pricing (8%)
  • Invoicing software difficulties (8%)


These challenges become more complex due to a common belief that Accounts Payable departments are intentionally holding up payments. This strains relationships with suppliers and makes it difficult for oil and gas suppliers to keep their operations steady.

Why Managing Disputed and Missed Tickets Doesn't Solve the Cash Flow Problem

Tackling the issue of disputed or missed tickets is crucial for oil and gas suppliers facing cash flow challenges. Many companies find themselves in constant contact with Accounts Payable departments, a process that consumes valuable time and resources. This intense focus on administrative tasks diverts attention from strategic priorities, leading to inefficiencies and increased operational costs.

Some companies resort to collections agencies, which, while solving the immediate problem, bring about extra costs. These traditional methods are not only expensive, they also focus on solving a problem that could be prevented in the first place. The real challenge to cash flow is the long payment terms, forcing companies to seek extra financing. By cutting down these lengthy payment terms, we tackle the issue at its core. Adopting solutions to get early payments, like invoice factoring tailored to oil and gas addresses the underlying problem while sidestepping the issues of high interest rates and tight lending criteria.

Invoice factoring: A strategic solution

Facing these challenges, factoring stands out as a highly effective solution. But what is invoice factoring, and how does it work?  Invoice factoring is when you sell your unpaid invoices to a factoring company for a quick cash advance, and then the factoring company takes on the task of collecting the payment from your customer. In a nutshell, factoring with FundThrough involves:

1. Creating or connecting your account: Set up a free account, which is linked to your email address or existing accounting software–like Enverus’ OpenInvoice.

2. Selecting invoices: Choose which outstanding invoices you want paid early. (Other factoring companies require minimum monthly fundings.)

3. Getting funded: FundThrough provides you with an advance on the invoice value (minus a transparent fee), usually within a few days—offering immediate access to working capital.

4. Collection by the factoring company: FundThrough then takes on the responsibility of collecting the invoice payments from the customers, relieving the original business from this task. (Here’s how FundThrough works with your customers if this concerns you.)

By adopting invoice factoring, companies can easily offload the burden of late payments and administrative hassles. This paves the way for immediate access to working capital, making sure businesses can carry out projects on schedule and pursue expansion opportunities without being held back by the limitations of conventional financing or net terms.

Ready to unlock cash flow with an early invoice payment?

Why FundThrough?

Here are a few reasons why small businesses in oil & gas embrace invoice factoring with FundThrough:

  • Quick Access to Working Capital: Provides capital within a few business days, significantly faster than traditional payment terms or bank approvals.
  • Integration with OpenInvoice: Easily pull eligible invoices into your FundThrough account via our integration with Enverus’ OpenInvoice. 
  • Flexible Funding Options: Companies can choose which invoices they want to fund, whenever they need it. It provides the cash flow for any project, be it payroll or equipment. 
  • Streamlined Application Process: Qualification and application processes are quick and straightforward, eliminating the need for extensive paperwork.
  • Combating Inflation: By rapidly converting invoices into working capital, businesses can access their cash faster to keep up with increased costs due to inflation. 
  • Elimination of Late Payment Issues: Factoring not only reduces but completely eliminates the costs and time delays associated with late payments.
  • Debt-Free Financing: Different from bank loans, invoice factoring doesn’t incur debt or appear as a liability on your balance sheet.
  • Control and Ownership: Allows you to secure necessary capital without diluting ownership, keeping complete control of your business.
  • No Long-Term Commitments: Once the customer pays their invoice, there are no further obligations, offering a flexible financial solution. 
  • Transparent Pricing: Clear and upfront fee structures without hidden charges, allowing for predictable financial planning.
  • Professional Client Relationships: We interact with customers only upon your approval, ensuring respectful and professional interactions.

Master Your Cash Flow

For companies struggling with cash flow issues during challenging times, get these expert insights and tips.

Unlocking Cash Flow Unlocks the Current Growth Opportunity

As the oil and gas industry in North America enters a phase of significant growth, companies must face these financial challenges proactively. By understanding and addressing the causes of late payments and leveraging strategic solutions like invoice factoring, these businesses can transform their cash flow management from a hurdle into a competitive advantage. This proactive approach will not only facilitate immediate operational stability but also lay the foundation for sustained growth and success in a dynamic and evolving market.

Ready to unlock cash flow by getting an invoice paid early?

Explore fast payments with an experienced fintech

Interested in possibly embedding FundThrough in your platform? Let’s connect!