We are living in a digital age where almost everything happens in an instant! We pay our bills online, receive salaries online, shop online amongst other things – all in a click of a button. However, in the enterprise world; you find companies especially large ones struggling; to pay suppliers on time, get discounts on early payments, and even struggle with their invoices. What can be done to solve these issues? Is there a faster method which doesn’t compromise on security? Can Blockchain help?
Current Scenario of Large Corporate companies
Certain large enterprises receive more than 10 million invoices a year from more than 50,000 suppliers. These are handled by the Account Payables department who digitally scan these invoices; ensuring that there are no duplicates, keeping track of supplier data and finally, making payments on or before time.
Research shows us that 60% of supplier inquiries are for invoices which have already been paid. This is mainly due to inadequate information being sent to the supplier, who then start raising questions. These queries would then be handled by the Accounts Payable department, adding to their already existing workload.
And we think that we’re reaping the benefits of living in a digital age!
Although supplier portals could eliminate some of the queries through self-service, the leading cause of the problem is that suppliers and the organization do not share the same data platform. Imagine how much trust could be established if data on payments is shared with the supplier on the same portal.
Conventionally, organizations are accustomed to accepting paper-based invoices, digitizing them, storing them in their ERPs and then paying them. Finally, an e-mail/letter is sent to the supplier informing them about the payments.
What if we can do the entire process on one platform? Can we make it faster? Is it possible to reduce the need for paper? Will we eliminate the use of invoices?
The solution – Blockchain
The one technology that could massively disrupt this infrastructure is the Distributed Ledger Technology (DLT), or more popularly known as the Blockchain. It creates a shared ledger that can be used by all the parties, and have trust restored in the cycle.
A supplier can fill the invoice details online which would directly be posted on the company’s ERP. The automated smart contracts, present in the system, can perform checks such as duplication and validation. They could also apply discount parameters earlier and send these details to the bank. The bank would automate the payment and put the remittance details on the blockchain. This would then be fed to the supplier, who would thus instantly know his payment status.
But, isn’t the idea too futuristic? Are we ready to implement such technology in our companies?
Of course, we are ready. Various companies have already begun to implement the Blockchain in their systems. For example, in India, Bajaj electricals have reduced the time taken to settle payments between them and their suppliers from several weeks to a few hours, all with the help of the Blockchain technology.
Blockchain would massively disrupt the finance infrastructure. Let’s gear ourselves for it.