Digital Blockchain – A Game-Changer for Finance and Accounting

  • April 12, 2022
blockchain image with a rising data line overlay

Is it time for the finance and accounting sector to go through the much-debated metamorphosis with the advent of the Blockchain era? Certainly yes, at a much steady pace. Blockchain, the headline-grabbing decentralized digital currency ecosystem proposed in 2008, is now gradually taking over enterprises' digital and financial transformation and will be a potential disruptor of several industries, from banking and financial services to the public sector and healthcare.

My earlier blog post, 12 “Must-Dos” for CFOs to Future-Proof Their Organizations, offered a perspective into how, in this digitally enabled world, the success of the CFO / Finance Director / CIO is determined by their ability to leverage digital transformation with cutting-edge technologies. This post focuses explicitly on blockchain as a way to optimize business processes and glean actionable, data-driven insights.

Blockchain and the future of finance and accounting

Finance and accounting with blockchain technology adoption will see significant growth in the near term as enterprises adopt a completely divergent and new operating model. While it is anticipated that overcoming the challenges around integration with legacy systems will hold the key as these systems are still relevant in some industries, such as retail, travel and hospitality. Traditional ERPs will remain essentially the same but will be supplemented by blockchain technology, enabling a seamless experience around the accuracy of data viewed in real-time and to a new world of greater opportunities.

Governments across the globe will need to enforce greater controls and discipline with stringent regulations in place, both for the enterprises and their private and public partners. For example, the consortium of blockchain companies in the industry could throw up challenges and risks around data sensitivity controls as more public ledgers are embraced, given the decentralization of activities in finance and accounting.

As they decide to embrace blockchain, the CFOs and finance directors of tomorrow will seek to understand further and convince themselves around:

  • The applicability of sub-processes — more specifically, the challenges that could be supported by blockchain
  • Risk management and mitigation
  • Infrastructure funding by way of ROI and longer-term investment planning
  • Stakeholder onboarding and management, including the regulations for admission
  • Planning and strategy around new roles with HR

Blockchain technology application in Industry 4.0

Investments in blockchain technology are expected to surpass $15.1 billion by 2024, causing disruptions throughout industry verticals. According to global industry statistics, the blockchain market is forecasted to grow at a CAGR of 79.6% from 2018 to 2023. According to CoinDesk, over 82% of institutional investors said they would increase spending on (Blockchain) Digital Assets by 2023. Blockchain as a Service (BaaS) is gradually gaining significant momentum and market growth across medium to large enterprises that will pivotal this and be the primary adopters of this technology.

Potential pilot processes for blockchain in finance and accounting

Some process / sub-process areas within F&A where blockchain is being piloted or moving into production include:

  1. Accelerating vendor onboarding through blockchain-driven KYC
  2. Eliminating the manual scanning of invoices — paving the way for shared access to the distributed ledger
  3. Eliminating inefficient and manual processes through native application programming interfaces (APIs) — further strengthening ERP-based systems
  4. Eliminating two-way / three-way mismatches that result in invoice exceptions which can lead to inordinate delays in supplier payments
  5. Accelerating supplier payments and remittances, especially wire transfers and EFTS
  6. Embedding supply chain financial terms directly into smart contracts, providing additional value to both the sides of buying and selling.
  7. Minimizing collection disputes by reducing exceptions

Accelerating the record-to-report value chain

In the record-to-report value chain, companies struggle with longer close times, manual interventions, and inefficient consolidation and reporting processes. Blockchain will be a game-changer and be viewed as an enabler of a faster close process, benefitting potential sub-process, including:

  • Close sub-ledgers (accounts payable and accounts receivables)
  • Close fixed assets and inventory
  • Assist in inter-company accounting and transfer pricing (excluding allocations)
  • Calculate and post deferred taxes
  • Prepare P&L statements and financial schedules, including submission of reporting packages
  • Execute general ledger accounting a close (excludes FX revaluation, non-standard journal entries, close general ledger)

Potential future roles in blockchain finance and accounting:

Additionally, the use of blockchain in finance and accounting could result in a new wave of expertise, which, in turn, could allow career paths for many employees new to the finance and accounting field. A generation of digital natives has discovered blockchain in their everyday lives. That experience could lead to a career in:

  • Smart contracts auditing
  • Controllership and compliance auditing
  • Blockchain access and controls administrator
  • Arbitration and disputes settlement officer

In this increasingly digitized and automated world, finance and accounting as a function will grow in strategic importance. Blockchain could enable real-time settlements (instantaneously enabled by smart contracts), provide a single version of the truth, eliminate reconciliations, and provide greater transparency, opening up to a paradigm shift. While digital business blockchains would be perceived as being among the ‘Vital Fews – Forward,’ their value realization is expected to grow rapidly and equally as combined with other technologies.

NTT DATA’s global blockchain capabilities have gained immense competitive advantage and are well recognized as a market leader in enterprise blockchain services by many leading analysts firms.

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Bala Iyer
Balaji Venkat Chellam Iyer

Balaji Venkat Chellam Iyer is a Senior Specialist Advisor in the Chief Digital and Strategy Office at NTT DATA Services, and has more than three decades of experience across global markets with expertise in Finance and Shared Services. Balaji has handled diverse roles from financial planning and analysis, service delivery, process redesign, program management, solution development, and presales to process migrations. He has been part of global transformation projects over the lifecycle – from due diligence and feasibility to change management, and implementation, and has helped clients by developing solutions specific to their business objectives and needs.

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