Huh!... Blockchain and AR Automation? What’s the connection?
This would be the question on the minds of most of us because when hear the term ‘blockchain’, we almost immediately think of cryptocurrency (Bitcoin, Ethereum…). Well, there’s more to blockchain than just cryptocurrency. In fact, blockchain offers tremendous opportunities for multiple applications, and one such potential application is in the management of Accounts Receivables, as part of the e-invoicing process.
For any business, the current invoicing process involves delivery of invoices (either online or offline), followed by a reconciliation process against POs & purchasing system data, and finally payment. This, already long process, is slowed down by the need for approval and review at every stage. While automation of e-invoicing helps deliver invoices faster, and businesses are looking at automating payment processing as well, there are still several ways to increase accuracy and speed.
And one key way is Blockchain-enabled e-invoicing, which not only improves speed, but also is more secure and transparent in terms of billings and payments. It can also help preserve easily-accessible records of past transactions.
Before we talk about the benefits of Blockchain in the AR Processes, it’s important to understand the basic principles of Blockchain.
WHAT IS BLOCKCHAIN?
Blockchain is a shared, unchangeable ledger that that makes is easier to track assets and record transactions within a network of businesses. An asset might be intangible (intellectual property, patents, copyrights, branding) or tangible (house, car, money, land).
On a Blockchain network, almost anything of value can be recorded and sold, lowering costs and risk for all stakeholders. There are several methods for “mining” blocks and they confirm the legitimacy of the block and subsequently the chain. The underlying idea and advantages of this are universal. Further, the ledger’s visibility and validation are decentralized, making them more resistant to attacks and also to loss of availability.
HOW CAN BLOCKCHAIN WORK IN ACCOUNTS RECEIVABLE?
Blockchain, in fact, has a hugely disruptive potential in AR. Pre-approved transactions with the required data could be included on a blockchain (at the moment of purchase), guaranteeing that they are handled automatically by Accounts Payable. Accounts Payable (at the buyer’s) and Accounts Receivable (at the supplier’s) can access a common blockchain, and it eliminates the need to create separate invoices, electronic or otherwise. After that, the Procure-to-pay (P2P) process is enabled seamlessly right from ordering to billing to payment with access to a shared blockchain that is updated between the parties almost instantly.
Business partners, with access to a shared blockchain, can eliminate, or at the least lessen, the need to wait for human validation and approval of the agreed transactions. The result is faster processing of the transactions that can lead to a better cash flow. Isn’t that the ultimate objective for an AR Team?
It is unlikely that all bills will be substituted with shared blockchain access anytime soon, however, businesses can stand to gain from quickly integrating blockchain into their P2P Operation.
AR Teams, who are proactive and innovative enough, to provide blockchain support for the invoice process stand to gain a great competitive advantage. However, the AR Teams need to consider how the blockchain will co-exist with e- and paper-based invoicing. Always remember, the most effective way to leverage fast-evolving business technology involves working with expert service providers so that the managed services or outsourced solutions can be efficiently utilized.
WHAT’S HOLDING US BACK FROM ADOPTING BLOCKCHAIN FOR ACCOUNTS RECEIVABLES?
A certain degree of aversion to change and inertia from businesses are the main obstacles to wide adoption of blockchain. While businesses have moved on to digital processes for several aspects of their operation, they still continue to generate and send out paper bills. The delicate nature of invoices, which are most crucial for a company’s cash flow, in fact, is making the changing the invoicing process a difficult and uphill task.
Moreover, one of the most crucial business concern is Channel Shift. Businesses need to look for knowledgeable partners that can help them in the transition from outdated practices to modern ones. It’s a well-known fact that change and disruption bring forward a huge potential to outgrow and outperform and the first-movers will always emerge victorious with a great competitive advantage.
HOW TO BRACE FOR THE BLOCKCHAIN REVOLUTION?
While we are not currently advising to hire completely new staff for the application of blockchain solutions, it would be worth it to plan ahead. Enquire how new-age Accounts Receivable Automation Software, such as Inebura, can help and transform your Accounts Receivable Teams handle invoices in a variety of forms and standards and do not forget to include the ones, such as blockchain, looming in the future, if and when it becomes applicable to your market.
Connect with us to see how an AR Automation Software, such as Inebura can help transform your entire AR Process by making it more productive and efficient. You can visit our website www.inebura.com or write to sandeep@inebura.com to book a demo.