Blockchain technology has all of the characteristics required in order to make significant improvements to the reliability of invoice workflows. Blockchain technology allows for the exchange of digital assets, and those assets cannot be duplicated.
This core technology can also be applied to the process of electric invoicing, and allows the possibility to completely revolutionise the transaction process, as well as the validation of invoices. Blockchain is most commonly known as the building blocks behind popular discussion points such as Bitcoin and other cryptocurrencies. However, it is not often known that there are significant technological benefits to blockchain as well. The blockchain allows for each individual block to record a transaction, and creates seamless payment reconciliations. When an invoice is applied to the blockchain, the document sits within a decentralised blockchain network. This blockchain network provides record keeping of who has made any changes and when the changes were made.
The core benefit of blockchain technology in relation to invoicing is the ability to eliminate risk of tampering and provides absolute transparency. The records are secured and linked using cryptography, and all aspects of the record are visible by all parties, which eliminates the requirement for any intermediary involvement.
Utilising the blockchain for an invoicing process allows for completely seamless payments to be made from a customer to a business’ digital wallet. There are also features of reduced fees when it comes to transferring money via the blockchain. These transactions are simple to track and monitor, and there is a history record kept of all exchanges.
Comparatively, traditional methods of payment processing tend to lack the level of transparency that the blockchain provides, and there is little to no audit trail to follow. This can increase the risk of fraudulent actions.
Difficulties with the Current Invoicing Process
– Manual Documentation: There is currently a very laborious manual documentation process required with invoicing. The whole process involves creation of the invoice, submission of orders and proof of delivery. This makes the process tedious for clients, and also increases overheads for the business. There is a high potential risk of data loss, especially when records are kept as hard-copies.
– Time Consumption: Invoicing as we know it is an incredibly manual process with a significant lack of automation. There is no way to instantly approve invoices. Blockchain technology allows for smart contracts to be set up to release funds as soon as certain criteria are met.
– Fraud Potential: The manual process of auditing the invoicing process means that a random sample of invoices may be checked and verified against their paper trail. However, this means that fraudulent invoices can slip through the cracks. Comparatively, blockchain creates an end-to-end trusted verification which evidences the completion of work with the Purchase Order, Invoice and Proof of Delivery all uploaded to the blockchain and verified by associated participants.
– Data Tracking: A traditional invoicing setup does not allow you to fully track the invoice throughout the process. The bank, recipient and payee cannot track the transactions in real time, and the invoice process is only kept transparent if communication is clearly upheld. This is not the case the invoicing via blockchain technology.
BillBird offers a solution which can transform the invoice dispute process between parties. Due to the high level of transparency that the blockchain network provides, there is a singular source of truth which is visible to all related parties. The overall solution to the aforementioned invoicing difficulties is automation which is enabled by smart contracts.
Some core benefits of blockchain technology-based invoicing:
– Quick dispute resolutions
– Less cash reserves tied up awaiting dispute resolution or payment
– Lower risk of reconciliation errors or disputes
– Reduction in manual involvement, therefore labor cost savings
– Improved relationships with partners, suppliers and customers
The Process of Invoicing via the Blockchain
1. Purchase order is issues through the banks distributed blockchain ledger
2. Client will complete required work, then the completion of work sign-off is uploaded to blockchain as soon as complete
3. Invoice is then created and raised to the blockchain
4. The blocks on the chain independently verify and confirm the end customer and client communication
5. Smart contracts pre-pay the invoice once the specific criteria are met and verified. This leads to instant funding
Permissioned blockchain invoicing can be implemented, which allows for more confidential aspects to be applied to the invoicing process. This can create certain rules which means that the end debtor can only see certain stages of the invoicing process. This required adoption from the client and debtor.
The Benefits of Bill Bird
– Automation: Blockchain technology removes the requirement for manual processes involved with invoicing. This leads to a paperless system, which can run seamlessly.
– Real Time Settlement: Funds can be distributed to the client in real time when the criteria are triggered based on the Smart Contract rules.
– Real Time Tracking: All related parties can directly track where in the process the invoice currently is. This can add significant levels of clarity to what may be holding up a payment. Comparatively with a traditional invoicing setup, communication with the other party is required to obtain full transparency.
– Fraud Risk Reduction: All related parties are able to gain full transparency over the process, and therefore all relevant parties can verify the process. This significant reduces the risk of fraudulent payments.
– Data Risk Analysis: Data can be obtained from the transactions stored on the blockchain. This data can be used alongside artificial intelligence to gain an understanding on the profiles of debtors, and the potential risks certain profiles may pose.
