One of the fascinations of the NGL and distillate markets is the amount of detail in the pricing of a contract. Simple fixed price propane contracts may contain escalators or cost of money additions each month. Alternate locations may have differentials. Delivered contracts have a freight rate and a freight surcharge that changes during the life of the contract. Correct pricing is paramount in maintaining profitability.
These pricing items must be 100% accurate. Incorrect invoicing for lower amounts causes immediate effects to the bottom line of the supplier or wholesaler. Invoicing for higher amounts causes loss of confidence and questioning from the customer. All of this causes inefficiency in the marketing and accounting teams to ensure pricing is correct.
Homegrown or outdated systems have little in the way of automation to ensure pricing remains correct. Many of the variables of pricing cause incorrect invoicing that has continued for years. Training of new accounting staff adds additional complexity. Staff must intricately understand how each agreement works and how antiquated software processes these transactions. Direct impacts are inevitable on profitability and growth for the business.
Correct Pricing Starts with C3
C3 simplifies this. With standard processes for many contract types, fee types, freight, and freight surcharges, pricing complexities are largely automated. During many of our implementations, testing of C3 and paralleling against the existing system has often found extreme billing errors. Many of these billing errors have existed for years and caused considerable losses for the business!
C3 also adds automations for external pricing sources such as OPIS and Platts. With automated price uploads, we ensure index based contracts are priced correctly. Third party posted pricing is also maintained in C3. These price feeds are paired with an automated market index calculation module which ensures accurate and timely calculation of index pricing. The calculator handles many contract types including month average, lower of two indexes, and day of lift.
It is tough to know whether these inaccuracies exist or to even begin to quantify the magnitude of the problem. A simple evaluation and research session can help quantify the issue. Through analysis, we can outline major areas of concern to ensure correct pricing. These areas are paired with an evaluation of long term growth plans. Roadmaps are then designed to correct errors and improve profitability.