For a company to stay competitive on the market is like fighting a corporate war. You need to know your company’s strengths and weaknesses, know your competitors in and out, be more efficient, have better products, and be able to service your customers better to win the game. All parts of your organization are always harnessed to looking for ways to do things better and cut costs to beat your competition. Finance organizations share the same burden, and are often required to bring down the total cost of finance function year after year.
In a Finance organization, you’ve probably already implemented an ERP system, consolidated functions into shared service centers, streamlined and automated processes left and right, but are still facing the ask to do things even more efficiently and with less resources, and to close your books faster. What could you possibly do more?
Look for Savings Within Your Business Network
Some of the most labor intensive functions in Finance are a result of your relationship with your customers and vendors, your business network. Dispute management and reconciliations in your procure-to-pay and bill-to-cash functions abide to something resembling the 80/20 rule: 20 % of the transactions take 80% of the Finance team’s time to resolve. Whether the amount of disputes or reconciliations requiring manual intervention is 20% or 10% of all the transactions, it typically tallies up to a significant number. Any way to reduce the time spent on them makes a big impact.
Blockchain based invoicing, clearing and settlement solutions will address these two labor intensive Finance functions, disputes and reconciliations, and considerably lower the manual work required to perform these functions. Smart contracts in blockchain prevent disputes from happening as the contracts are not executed if the terms of the contract are not fulfilled, and transactions not approved by all parties. All required data is shared with all parties, providing the single version of truth visible for everyone. As a result, reconciliations become unnecessary. In addition, you’ll free up working capital and reduce your risk.
Where ever there’s a Finance process with invoicing, reconciliation and settlement, there’s room for efficiency improvement using blockchain. With blockchain, transactions between two companies are automatically visible for both companies simultaneously and permanently, and transactions can be settled in real time. The impacts are significant. IBM Global Financing Unit discovered that they were able to cut down cost per invoice 60-80% by using a blockchain based invoicing solution for their supplies and partners, and reduce dispute time from over 40 days to under 10 days.
Using blockchain to enhance your Finance organization can significantly reduce your costs by eliminating reconciliations and disputes, but it can also turn your Finance organization to your competitive advantage. By eliminating disputes from your process, you are automatically providing better service to your customers and vendors – ease of doing business with you is one of the factors keeping your customers and vendors coming back. By being able to reduce the amount of working capital tied to the dispute resolution process, you will be able to redirect the capital to better purposes, to something that really matters for your business. And with atomic payment settlements, you will able to better manage your cash flow better and plan for the future.
Where are you and your competition in utilizing blockchain for your competitive advantage?