How Blockchain can Eliminate Inefficiencies in the Traditional Procure-to-pay Process
There is a peculiar thing about P2P (procure-to-pay) process improvements. Given the sophisticated set of tools available today, the communication between stakeholders (vendors, sub-vendors, and banks) should be simple. Surprisingly, it isn’t!
The conventional P2P is inefficient
Generally, any effort to improvise the P2P process is troublesome and time-consuming. Most of the time, problems occur because of the buyer and the seller function in different ecosystems. Each of them works over their own ERP systems, thus getting exposed to different sources of the same truth. As the transmission of data is not in real-time, the information between stakeholders and their systems is inconsistent, culminating in wasted resources and higher cost.
Understand the functioning of business blockchain
A B2P blockchain solution for procure to pay works two ways — streamlining finance functions and enabling transparent communications. The blockchain verifies data and aligns it across entities. The distributed database arranges for a single source of truth between the buyer, the seller, and the other concerned parties, enabling them to get over communication challenges. Such a platform, along with an enclosed record of the transaction, serves as an only uniform source of what the stakeholders want to know.
B2P blockchain solution vs. traditional setup
The conventional corporate setup often distributes unaligned information across companies. Missed updates of master data and manual entry of information from emails lead to inconsistency between databases with two enterprises.
Business blockchains, however, are distributed databases accessible to all permissioned participants at any given time. Once data is recorded on the blockchain, no changes can be made. Blockchains only append the data. Any change in the protocol requires the consent of everyone associated. The format of blockchain is such that it rolls out a complete and verified record of transactions in chronological order.
The role of smart contracts
A smart contract, an integral part of business blockchains, automatically executes certain actions when the pre-defined conditions are fulfilled. The human role is either eliminated or brought to a minimum. Even the invoices are generated by the smart contract, depending upon the details entered.
For instance, if the agreement provides for payment after 30 days, the smart contract will execute the payment after 30 days.
Sharp in detecting anomalies
Implementing blockchain in procurement can efficiently review and detect the anomalies between the purchase order and the sales confirmation before or upon delivery of goods. In the P2P process, it is a known issue causing friction. Depending upon the time of error detection, the misalignment could result in enhanced cost or delayed production in case the wrong goods have been delivered.
When a business blockchain agrees on the details about an order (place, quantity, time of delivery, etc.), an automated confirmation is created based on the agreed data, thus eliminating any likelihood of a mismatch.
Integration with ERP
A B2P blockchain solution for procure to pay can be seamlessly integrated into an ERP system. Smart contracts perform the data transfer to the ERP system. When the buyer and the seller agree on terms, the smart contract is put on the run. All the stakeholders can get accurate, updated master data in their systems. They can use this master data to base their orders and pricing. This procedure eliminates the errors germinating from poorly-fed master data. The introduction of blockchain optimizes the reconciliation process.
When it comes to procure-to-pay, communication between various business stakeholders is always complicated. A business blockchain, however, streamlines communication, infuses transparency, and makes the system automated. It helps detect the anomalies between the purchase order and the sales confirmation, thus eliminating the pain point.
At Antier Solutions, we provide a blockchain-based procure-to-pay solution that covers the entire spectrum of P2P processes — from scanning and processing invoices, data management, funds management to ensuring on-time payment while minimizing value leakage and reducing the cost of operations.
Connect with our subject matter experts to share your needs for a B2P blockchain solution for procure to pay.