Unleashing Blockchain in finance
For Blockchain, the future is now.
In this issue of CFO Insights, we will discuss why CFO's should consider remaking or reengineering their finance processes by implementing Blockchain technology in the workplace, and the positive impact it will have on their finance team.
- What Blockchain does
- What it means for the CFO
- What it means for the Finance team
- Get in touch
Distributed ledger technology, and moreover Blockchain, first gained prominence years ago as the backbone of bitcoin, the pioneering peer to peer network and cryptocurrency. But while the digital currency’s value has fluctuated, Blockchain’spotential as a ground-breaking technology for business, capable of slicing through layers of inefficiency, is gaining momentum.
In Deloitte’s 2018 global Blockchain survey, which drew responses from 1,053 executives across seven countries, 74% reported that their organisations see a “compelling business case” for using Blockchain technology. Fuelling that interest is a growing awareness of the value Blockchain can drive as a platform that integrates operational processes such as supply chain, customer/channel operations, and service with finance processes. In doing so, the technology may replace today’s siloed approach to transaction processing, with its multiple handoffs and time-consuming data entry and reconciliations.
In addition to driving significant efficiencies and cycle-time reductions, Blockchain provides full end-to-end transparency across operations and finance, enabling predictive operational insights and opportunities to optimise working capital.
What Blockchain does
Blockchain can be used to remake, or reengineer, a wide range of finance processes: intercompany transactions (when there are multiple ERPs), procure-to-pay, order-to-cash, rebates, warranties, financing (such as trade finance, letters of credit and invoice factoring). Any place paper piles up, and where workflow is distributed between multiple parties, presents an opportunity for Blockchain to move in and knock it down.
What does it mean for a CFO
Here are a few steps for CFOs to consider:
1. Assign a Blockchain champion.
Blockchain should be a business-led initiative, requiring strong sponsorship and leadership provided from the ranks of finance executives. They can start to envision how the various functions might benefit from implementing Blockchain, identify value drivers, and build business case frameworks.
2. Invest in talent.
Pull together a focused cross-section team from supply chain, customer/channel operations, service, and finance to identify and prioritise pain points that could be targeted and develop a hypothesis around how the use of Blockchain will solve the business problem
3. Forget the technology.
Focus on how Blockchain will potentially disrupt or shift your operating model. The process involves understanding the transformative nature of Blockchain, then talking with customers, suppliers, and C-suite peers to identify potential use cases. Given that Blockchain’s value proposition relies on multiparty transactions, select external partners who share the business challenge you are focused on and are therefore likely to be receptive to participating sometime in the future.
4. Think big, start small, and iterate often.
Understanding the “art of the possible” is creating a lot of excitement, but where to start? Blockchain’s capabilities may be put to more efficient use in the external world, but as an introduction to the technology, it may be best to focus on an internal issue, such as intercompany transactions.
5. Launch a pilot.
Having identified finance pain points, select a use case where Blockchain will likely produce a real return on investment (ROI). Track the results, especially transaction times and costs, to judge the technology’s suitability for larger scale iterative processes
What does it mean for the Finance team
Blockchain is one of a number technologies, including RPA and AI, which will create a new digital processing infrastructure between value chain participants. This will result in the reduction of paper, reconciliations and manual rekeying resulting in faster processing time (and even straight through processing) and overall operational excellence. This will provide teams with the ability to focus on their value-add role as opposed to administration which currently consumes time and effort. Add to this the standardisation and normalisation of data within the infrastructure and we will create the data fuel for more advanced “engines” such as for enhanced risk and performance management. Organisations cannot sit still, learning, development and continued growth are more important now than ever.