Plugging Fund

To ensure that the proper funds will be available to plug a well once it has completed production many operators are holding back some revenue during peak production to set aside as a plugging fund. SherWare does not provide a formal option that can be used to withhold and track this fund. However, you can still accommodate this task within the software. Our suggested process is listed below.

Tracking the Balance:
Track the account balance outside of Distribution part of SherWare. DM users can track this on a spreadsheet or within whatever accounting program they use. DMIE users can setup a specific account in QuickBooks to track all of the balances. You can have one account for all plugging funds, or a separate account for each well. AM users can setup a specific account in SherWare to track all of the balances. You can have one account for all plugging funds, or a separate account for each well.

Withholding the expense:
To withhold the amount from the investors you can charge an expense to the well. It is often too large to withhold the whole amount at once so it is often broken out into smaller amounts so the burden is spread over time. This can be setup as a Fixed Expense or recurring bill to make the process easier to enter each month.
Once the desired amount has been withheld, then you can stop charging the expense to the well.

Setting up the Vendor:
A vendor will have to be used since this will be charged to the well as an expense. The vendor that represents your company can be used. If you don't want this activity to appear as your company then a generic vendor may be a good option. By default a check will be created which will be deposited into the bank account for the respective plugging fund. AM and DMIE users can take advantage of the vendor posting option which allows you to post the amount directly to the account that represents the fund instead of creating a check.

Setting up the expense:
An expense code can be created that will be used for the plugging fund. You can name it "Plugging Fund" or anything that sounds good to you. If you will be taking advantage of the vendor posting option, then the vendor posting account will need to be specified for the expense code. Select the account created to represent your plugging funds as the "Post Operator's Income as vendor for this expense to QB Income Account".

Plugging the Well:
When the time comes to plug the well, you don't have to enter the expenses in SherWare, because you have already deducted the cost from the investors.