How Blockchain technology can help you in Accounts receivable:
Accounts Receivable function is one of the most imperative function of any organization! The best AR function always helps you to maintain the cash flow of the organization.
Account Receivables Management refers to the set of Predefined policies, procedures, and practices employed by a company with respect to managing sales offered on credit. They are the one of the backbones of sales-generation, and thus must be managed to ensure they are eventually translated into cash-flows.
A company that fails to efficiently convert its receivables into cash can find itself in a poor liquidity position, crippling its working capital and facing unpleasant operational difficulties.
So how Blockchain can help you in managing the proper function of the Accounts Receivable division?
Presently in the manual system for Accounts Receivable accruals, following proper accounting standards requires periodic auditing, keeping track of payments received and allocating them in either of receivables, liability or revenue. For tracking hundreds of A/R accruals, the process is time taking, cumbersome and prone to errors.
Blockchain as a technology operates on two fundamental concepts ie. Distributed ledger and smart contracts! It is a shared, distributed ledger that facilitates the process of recording transactions and tracking cash flow in a business network. Through this ledger, an immutable record of all transactions is present on the blockchain for all participants to access like the entire eco systems of Vendors, suppliers, retailers and whole sellers
With distributed ledger, every participant has access to a single valid document and use it for further processing in their ERP system. Hence there are no inconsistencies with A/R and A/P. Buyer could also embed remittance details into the blockchain which everyone can access.
This eliminates the need to
- generate invoice
- pause for human validation
- approve agreed transactions
- issue remittance
- manually record individual transactions
All this results in accelerated settlements and improved cash flow.
Though you have to keep in mind that Blockchain is NOT automation. AR processes need to have ‘true’ automation in place for blockchain to show results
In our next article we will share with you the pre-requisites of implementing the Block chain in your organisation.