In today’s world of digitisation, the deployment of blockchain in varied finance-related functions, which include payments, can become extremely crucial for a department to grow. However, even though the benefits of blockchain are apparent to all, the companies have been usually slow when it comes to adopting blockchain.
The reason can be that executing blockchain might not be as easy as it appears. Its successful implementation needs internal and external preparation. Accordingly, to a PwC report, the highest-rated finance teams cost 0.55% of their total business revenue. The expenses go up for low-performing or some average teams, with the top performers operating at 36% lower expenses than the average performers. This is why it has been the primary agenda for financial officers of companies to transform the finance functions.
A few of the challenges that the finance functions face in several companies include,
- Boosting reconciliation activities, maintenance of ledger and payments
- Impacting customer experience and organisational agility by improving response time
- Enhancing the transparency factor
- Ensuring the accuracy of transactions and contracts
- Abiding by the compliance norms during when regulation norms change constantly
- Curtailing of duplication and fraud activities
In the face of such glaring challenges, blockchain can indeed play a very crucial role when it comes to the finance function’s altering strategies.
But to begin with, what exactly is blockchain?
Often known as a distributed ledger, blockchain is essentially a collection of data which is:
- De-centralised (the participants of the process can add data without an authority’s supervision)
- Transparent (the identities are kept secure while transactions can be screened on the network)
- Immutable (the data that has been added cannot be altered later)
When we discuss in detail how blockchain facilitates the finance structure, we see that the team using this technology, will not be required to record each and every transaction on the basis of the suitable receipts. Instead of that, the transactions can be recorded in a joint ledger, which can be distributed across several nodes. The asset, price, and the ownership details of such transactions will be noted down, verified and then settled across every node.
Blockchain can have wide applications in a finance structure. Some of them include:
- Data management in real-time.
- Renovating the payment processes.
- Bringing down the number of reconciliations.
- Settlement of inter-company transactions simultaneously.
- Reporting about the consolidated financial views of companies.
- Accounting function, through maintenance of account charts, product and project accounting.
- Financial management through budgeting, capital planning and forecasting.
Slow but steady start
Many organisations have been making use of the blockchain technology in the finance functionalities. But it remains a fact that its deployment has been so far a bit guarded. A recent survey shows while 60% of businesses were in favour of blockchain deployment, the rest acknowledged of not using this technology so far.
Well, the reason for a slow start can be that the technology is still in its nascent state, and yet to mature, with experts keen on finding the best means to implement it. It can also, be that an all-encompassing ecosystem is required first that can enable blockchain in finance.
Blockchain has come and is here to stay while offering overwhelming business benefits to organisations. Preparing an organisation is the first step so that it can reap maximum benefits using this technology. The successful implementation of blockchain will bring about significant changes in an organisation and boost its processes with unprecedented clarity.