Blockchain in Accounts Receivable | Blockchain Tech for AR


Whilst blockchain technology is most often associated with cryptocurrency (e.g. Bitcoin), there are enormous opportunities for this across the business. One such potential application is blockchain in Accounts Receivable, as part of the e-invoicing process.

Currently, invoices are sent (either electronically, or by post) before they are reconciled against POs and purchasing systems data, and then paid – each step requiring approval and review, which slows the process down. Whilst electronic invoicing enables swift, often automated, delivery of invoices and payment processing is becoming increasingly automated, there are still opportunities to improve speed and accuracy.

Blockchain-enabled e-invoicing can provide greater transparency of what has been invoiced and the progress of payments, as well as preserving an immutable record of previous transactions and enhancements in both speed and security of the invoicing process.

In order to understand the benefits of blockchain in Accounts Receivable processes, it is first important to understand the basic principles of blockchain technology.

“Blockchain-enabled e-invoicing can provide greater transparency of what has been involved”

What is Blockchain?

Blockchain technology gets its name from its structure. It is a chain of blocks, where each block of information (typically transactions) is created in a way that checks the validity of the previous block and consequently all proceeding blocks in the chain.

Blockchain technology is typically used to enable distributed ledger books. In such a case, each block would consist of the latest set of transaction records, and the chain would contain all transactions to date on the ledger.

Various approaches to ‘mining’ blocks and verifying the validity of the proceeding block and entire chain exist. The overarching principle, and benefits, of this are universal. However, the validation and visibility of the ledger is decentralised and therefore more secure against both attack and loss of availability.

How can blockchain work in Accounts Receivable?

The positive disruptive potential from blockchain in Account Receivable is enormous. Transactions could exist pre-approved on a blockchain (from point of purchase) with the necessary information to ensure they are processed automatically when reaching Accounts Payable. The shared access to a blockchain between Accounts Receivable (at a supplier) and Accounts Payable (at a buyer) removes the need to generate individual invoices – electronic or otherwise. The Procure-to-Pay (P2P) process then becomes seamlessly supported from ordering through to invoicing and payment via access to a shared blockchain that is updated in near real-time between parties.

Access to a shared blockchain enables business partners to remove, or at least reduce, the need to pause for human validation and approval of agreed transactions. This achieves faster transaction processing, leading to improved cashflow, an important goal for any Accounts Receivable department.

“Shared access to a blockchain between Accounts Receivable and Accounts Payable removes the need to generate individual invoices”

Realistically, not all invoices are going to be replaced by access to a shared blockchain any time soon. But businesses who are quick to adopt blockchain as an integral part of their P2P process stand to benefit. AR teams who can offer blockchain to support the invoicing process are creating competitive advantage through innovation. However, thought needs to be given to how blockchain will sit alongside traditional paper invoicing and e-invoicing.

The most effective way to leverage fast-evolving business technology is typically through working with an expert service provider, to leverage managed services or outsourced solution offerings. Leading e-invoicing providers, such as Corcentric, are well placed to support businesses seeking to integrate traditional invoicing, e-invoicing and blockchain as one service – enabling customers to progress from one format to another, as well as recording, managing and reporting on transactions from a centralised solution interface.

What is preventing the adoption of blockchain for AR?

The biggest barrier to blockchain adoption is corporate inertia and the fear of change. Very often businesses will have embraced digital processes throughout much of the business, yet still produce and deliver paper invoices. Due to the sensitive nature of invoices – integral to business cashflow – there is an inherent reluctance to modify invoicing processes.

“77% from the financial services industry expect to adopt blockchain as part of an in-production system or process by 2020”

However, channel shift is one of the most important topics in business. Businesses need to seek out expert partners to facilitate moving from old ways to the new. Kevin Gill, Insurance and Blockchain CTO, at IBM warns that “traditionalists face the threat of becoming irrelevant if they don’t move first”. Kevin goes on to explain that “There is tremendous potential for change and disruption. The winners are going to be those who are blockchain-enabled quickly. The earlier you are in, the greater your competitive business advantage”.

These sentiments are supported by the Global FinTech Report 2017 from PriceWaterhouseCoopers, they report that 77% of survey respondents from the financial services industry expected “to adopt blockchain as part of an in-production system or process by 2020.”

How to prepare for the blockchain revolution

Whilst we wouldn’t recommend investing in a whole new team to identify and implement blockchain solutions just yet, it’s important to prepare for the future. Talk to us today and find out how Corcentric can enable your Accounts Receivable department to support invoicing in a vast range of formats and standards, including blockchain when this becomes relevant to your market.