Blockchain and the Back Office: Why Transforming Finance & Accounting Takes a Trusted Transaction Partner

November 27, 2018 Nikhil Nayab

Nikhil Nayab is Conduent's Global Head for the Blockchain business unit.

Across every area of operations, companies are embracing new ways of doing things. Partly because they have little choice. New solutions and strategies are proving necessary to address their business and operational challenges (and stay relevant along the way).

Manufacturing teams are feeling the labor-shortage squeeze, for example, and rushing to train up workers’ skills and embrace robotics for productivity. Product teams, meanwhile, are incorporating human-centered design and consumer-friendly features into practically every product or service line — mitigating the risk of losing market share over poor user experience.

The back office is entering a transformative moment, too — one that’s well overdue.

After decades of only exploring how technology can make their transactions faster, leaders in the Finance and Accounting (F&A) areas are finally considering how to reinvent their processes—rather than just improve them.

Digital innovations are finally giving F&A stakeholders an opportunity to explore new paradigms for next-gen process management. Though it’s still in its earliest stages of enterprise application, blockchain will play a major role in the transformation of F&A: By creating an agile, platform-driven model for service administration, blockchain will help companies drive top-line advantages from their operational processes.

Thinking beyond a bolt-on tech solution

Digital processes are replacing manual activities throughout the enterprise, and the advantages are well understood — from lowering overhead and speeding up timelines to creating more accurate, real-time data for smarter analytics.

But with blockchain for F&A, the potential extends well beyond fast transactions and robust data. Blockchain doesn’t just bolt onto an enterprise’s technology stack to “modernize” existing processes — it transforms the way transactions are documented, organized and managed.

For background, a blockchain is a highly resilient public or private system that acts as an immutable ledger for transaction information.

Blockchains are comprised of many dozens of distributed nodes on a global network. Transactions are logged as “blocks” in the “chain” of the ledger, and broadcast across the network — allowing all nodes to trust the same shared, chronologically accurate record.

That allows blockchains to act as highly robust, reliable accounting systems requiring no validation by centralized authorities or intermediaries. More significantly, blockchain allows companies to manage their assets—and manage the rules governing the movement of those assets — within a single inclusive platform.

As you’ve undoubtedly heard by now, those advantages allow blockchain technologies to support digital currencies, execute smart contracts and track “tokenized” goods across global supply chains.

Blockchain also has tremendous potential for rethinking the way F&A operates. By creating a new architecture for immediate, two-way communication and feedback among parties in a transaction, blockchain will make F&A more valuable to the business.

Realizing benefits of integrity & accuracy

By diminishing the need for human authorization (and other time-consuming manual interventions), blockchain can automate high-touch processes in F&A — reducing the errors and inefficiencies that result from manual activities.

Relying on unalterable (and always-up-to-date) blockchain records can also vastly improve the transparency, timeliness and traceability of transactions. Those “three Ts” create unprecedented data integrity, allowing audits to eventually become unnecessary.

Eventually, of course, is the operative word. Blockchain technology first emerged in 2009, but it’s still in an early phase of evolution. The potential is tremendous, but applications in practice remain few.

Yet as one of the world’s leading providers of digital platforms for business and government, Conduent is at the forefront of exploring how blockchain’s benefits will help finance teams deliver new value.

Blockchain’s ability to “cut out the middleman” creates opportunities to reduce transaction costs and realize new efficiencies. But our approach to partnering with enterprises looks beyond solving clients’ transactional problems with speed or volume.

Instead, our outlook centers on changing the dynamic of our relationship with our customers — helping them design a new F&A function from the ground up, with a blockchain foundation.

A new foundation for financial agility

As a digital interactions company with a broad global client list, global blockchain talent pool, and deep experience in automation, analytics, and robotics, Conduent is ideally positioned to create the blockchain “fabric” that will underpin new, network-driven process- and service-delivery models. These models will have direct application in many of the world’s most important sectors — including automotive, healthcare, government and, of course, finance.

Our approach centers on using blockchain to help our customers compete. We’re building a blockchain platform for a more network-driven, interoperable future of business management — with the aim of helping our customers design new protocols, standards and systems for interacting and transacting with third parties.

By bringing ecosystems of partners together for fully transparent financial management (with all parties speaking the same standardized, digital language) blockchain will help our customers create standards for orchestrating processes efficiently among partners.

 

That ultimately reinforces trust and creates operational benefits in F&A across several key areas:

  • Order-to-cash: Auto-ledgers for order capture and management allow for no-touch processes in order-to-cash — with all efforts in billing, collections, disputes and reporting relying on one seamless, trusted source of information
  • Invoice-to-pay: Blockchain tracks transactions from procurement to payments, so invoice processing can be automated and payment triggered via smart contracts.
  • Supplier visibility: Mutually agreed, instantly verified records deliver always-on visibility into SLA adherence and help companies obtain standardized, useful supplier data
  • Record-to-report: With agreed protocols guiding interactions across the blockchain network, record-to-report is replaced by always-on financial analysis, with more dynamic predictive budgeting and forecasting for better accounting and tax compliance
  • Auditing and controls: Blockchain provides a crystal-clear transaction ledger for real-time transparency and end-to-end compliance

As these processes become more automated, there will be fewer intermediaries between the delivery of a service — that is, the actual work performed — and the resolution of that service (in terms of payments, controls, and confirmations). As a result, companies will enjoy unprecedented insights into supplier performance and service statuses across the enterprise.

Ultimately, that will help transform what was once considered “back office” F&A work into a driver of transparent, immediate front office intelligence.

Taking F&A into the future

As Conduent shapes the next generation of F&A, we’re still doing traditional transaction work and ensuring every invoice gets paid. But in helping customers explore and embrace new ways of doing things in finance, we’re also seeking to help them uncover new sources of revenue.

The efforts Conduent executes for our customers, across many areas of their operations — from healthcare invoice processing to public benefits administration to automotive supply chain management — lie inside fundamental areas of their businesses.

So by creating new ways for that information to be managed, processed and used, we intend to help enterprises find innovative new ways to expand their product or service lines for a more agile era of information sharing.

Blockchain will enable smarter “querying” of information, for example, via ledger-to-ledger communication. Many high-touch areas of enterprise operations are vastly in need of standards and protocols to enable more seamless, secure information exchange, and we see F&A as the ideal place to start.

With years of experience as our clients’ transaction processing partner, we respect the heritage of controllership and accounting — and the standardization challenges the functions continue to face — even as we explore new paradigms for agility in finance.

We welcome partners interested in pilot projects to explore blockchain’s full potential for transactional, operational applications. As service administration finally enters its transformative era, companies deserve a partner capable of building blockchain solutions and strategies that align F&A with the digital future of the enterprise.

For more information or to learn more about our proof of concept process, click here.

About the Author

Nikhil is Conduent's Global Head for the Blockchain business unit.

More Content by Nikhil Nayab
Previous Article
Is Blockchain the Key to Future-Proofing Procurement?
Is Blockchain the Key to Future-Proofing Procurement?

Globalization and digital technologies have lowered the costs of goods, services, and transport – helping p...

Next Article
Blockchain: Transforming Business as We Know It
Blockchain: Transforming Business as We Know It

Conduent believes that blockchain holds incredible promise to change this dynamic and transform business as...