Blockchain is transforming industries as fast as mobile platforms and the internet itself did before. Investors around the globe are scrambling to be the first to find new ways to make the technology work. In the financial world, blockchain implementation is expected to save tens of billions of dollars in administrative and accounting costs over the next year. Those numbers are expected to grow over time.
When you look at how blockchain works, it’s easy to understand the hype. Essentially, it’s an automated ledger system that improves security, integrity, and transparency. The idea that a ledger can be completely automated and decentralized removes reliance on banks and other intermediaries. It even cuts labor and tech costs for in-house accounting. Overall, the robust nature of blockchain is paving the way for better data management, and these are four ways it is already making an impact.
1. Smart Contracts
Company credit cards revolutionized efficiency. A trusted employee could maintain reasonable levels of autonomy and make monetary decisions that benefit the company. With that autonomy came risk. Unscrupulous employees have abused company credit cards since their inception, and the frequency of that abuse has brought on massive intermediary costs. Accounting groups have to review receipts, approve spending and ultimately add time and money losses to the whole process. Blockchain makes possible the “smart contract.”
It’s still in a fairly experimental phase, but companies are looking at ways to automate this aspect of expense reporting and managing. Instead of using a credit card, business to business contracts are created via a blockchain ledger. Because of its immutable nature, both businesses are protected from the risk of fraudulent expenses. Accounting teams don’t have to do anything except verifying the blockchain ledger (which can be automated), and these types of transactions are able to happen faster and with unparalleled trust.
The logic of smart contracts applies to business arrangements that don’t utilize a company card. Employees who pay out of pocket and are later compensated by the company usually suffer less distrust, but the process is as inefficient and costly as company credit cards. A blockchain system can automate reimbursement upon receiving proof of payment. Companies that are experimenting with the protocol enable the automated system to utilize direct deposit, so employees are reimbursed immediately.
This only gains efficiency when paired with smart contracts. In early stages, employees still have to submit receipts for verification. It doesn’t eliminate enough accounting expenses, but when an employee makes a company purchase through a smart contract, the reimbursement happens in real time.
3. Asset Management
While the previous items are in developmental processes, asset management is a tried and true application of blockchain. The idea of automated replenish predates the new technology by decades, but the blockchain ledger improves on every facet. Most obviously, the nature of blockchain ledgers makes them more reliable for documenting assets. Rather than continuously updating a snapshot inventory, a blockchain keeps a perfect record of the inventory history.
Browsing for changes and looking for trends or anomalies is simple. This makes the management more reliable, and it makes things like automated replenishing more accurate. Combine them with smart contracts and you have an automated ordering and payment system that keeps inventory exactly where you want it with minimal human oversight.
Every sufficiently large organization will eventually face a data breach. It seems inevitable. The primary point of vulnerability is the data storage center. This doesn’t have to represent a physical location. Instead, consider that every website ultimately has to store information to make it run. If a malicious attack can penetrate the security on that site, then all of the data is at risk.
One of the philosophies behind the development of blockchain is that decentralized data is harder to collect. When you utilize the process, no one device or storage location ever needs to hold all of the available sensitive data. This minimizes the risk of data breaches and makes it much more difficult to stage an attack in the first place.
These are just the biggest developments in blockchain that have already seen the light of day. Countless other innovations are in the works, and each year will see more data management move to blockchain systems.
Whether they are far-reaching publicly accessed ledgers or private, in-house systems, the blockchain revolution is in full swing.
About the Author: Chantel Soumis
Chantel Soumis brings over a decade of knowledge in workflow enhancement through the use of technology. Chantel studied marketing communications and business administration at Franklin University and proceeded to work in a fast, ambitious environment, assuring client delight in the healthcare and pharmaceutical industries. Passionate about project productivity and streamlining workflows through the use of technology, Chantel strives to inform organizations of Valicom’s advanced telecom expense management software and services by mastering communications and messaging while delivering helpful information and supporting resources.