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Demystifying blockchain for finance and controllership
How blockchain technology can benefit the future of finance
September 27, 2019
Emerging technology disrupters and their applications in finance have been recent focal points in the controllership function. Interest in new technology, such as cloud ERP and advanced analytics, have enabled the transformation of controllership. Blockchain is a lesser-known disrupter, but it is gaining traction with finance professionals as organizational leaders realize its potential as a groundbreaking technology for the finance ecosystem.
In a recent Deloitte Global Blockchain Survey, 83 percent of surveyed executives reported that their organizations see a "compelling business case" for using blockchain technology and 53 percent of executives said blockchain had become a critical priority for their organizations in 2019. This traction suggests a significant incentive to begin thinking about blockchain, but there is a mystical veneer around blockchain, with its innovative components and unique elements, that make it a challenge to define and contextualize into an organization's specific function.
What is blockchain? How does it apply to and benefit finance? Understanding blockchain is more straightforward when its application describes it. In our recent Dbriefs webcast, Demystifying blockchain for controllers: Is a revolution coming? we explored the possible uses and benefits of this technology and how it can work within the financial landscape.
Blockchain is a distributed ledger that allows the transaction of digital assets in a real-time and immutable manner, taking the intermediary out of the equation.
For example, in a traditional model, two companies who wish to transact while using disparate systems of record need to use a trusted third party to transact and reconcile the shared data. In the blockchain model, two companies transact on a shared platform and ledger, which facilitates the exchange of value without the need for a mediating third party. Each matching data set between the two parties creates a block in the blockchain.
—Michael Prokop, Deloitte Risk & Financial Advisory managing director
Understanding the application of blockchain in finance
There are many ways that organizations are experimenting with blockchain in areas that may have meaningful impacts on the controllership function.
Using blockchain for consolidation and intercompany eliminations enable instantaneous processing of transactions between business units, giving in an accurate view of current operating results and removing the need for manual adjustments or eliminations. Blockchain may also revolutionize the way an organization administers external reporting by facilitating the efficient validation and sharing of information between entities through a secured blockchain network.
For accounts payable and receivable, smart contracts provide instantaneous account settlement upon the delivery of assets, which may reduce the accounts payable cycle time and increase the security of the settlement transactions.
Blockchain’s potential benefits to finance and controllership
Blockchain is a transfer of value that enables secure, near real-time, low-cost transfer of that value without an intermediary. This may help lower costs, facilitate efficient and secured transactions involving almost all types of data, and lead to better transparency for both counterparties. Here are some of the many potential benefits of blockchain in finance and controllership:
- A blockchain solution can offer automated, high-fidelity and low-cost mechanisms for record-keeping
- Requires user-specific encryption keys—records are kept in the ledger but only accessible by authorized users
Transfer of value
- A blockchain solution enables secure, near real-time, and low-cost transfer of value without an intermediary
- Allows transfer of records and value between parties, removing the need for a trusted intermediary
- A blockchain solution transforms the production of contracts
- Contract protocol is programmable to trigger the transfer of value and information under certain conditions
- Smart contracts can be developed, exchanged, and automatically executed on decentralized systems
So what are the next steps for controllers and finance professionals who want to begin to assess if a blockchain program could be right for your organization? An optimal methodology to implement a blockchain program may look something like this:
- Assign a blockchain champion
- Invest in talent
- Forget the technology
- Think big, start small, and iterate often
- Launch a pilot
First and foremost, it is best to learn as much as possible about blockchain technology and its use cases in finance. To dive deeper into this emerging technology and hear more about use applications and benefits, listen to the full Dbriefs webcast on Demystifying blockchain for controllers: Is a revolution coming?
On-demand webcast: Demystifying blockchain for controllers: Is a revolution coming?
As blockchain becomes more widespread within finance organizations, controllers might find themselves challenged to make sense of unfamiliar territory. Now is a good time to learn about blockchain, but what should you know? We’ll discuss:
- Blockchain 101—what is it, how it is used, and how it could impact finance and controllership in the future.
- How to blockchain—practical use cases for blockchain with the accounting process and controllership function.
- Planning ahead—how controllers can better prepare for and integrate blockchain technology into their organizations.
Participants will gain insights into blockchain technology, how it applies to controllers and the importance of preparing for blockchain sooner rather than later.
In addition, you can access our Dbriefs Green Room discussion where the speakers address unanswered questions from the webcast and provide a deeper perspective on the topic.
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.