Blockchain and e-Billing: The Best Combination of Digital Transactions
Oct 19, 2020
Is Blockchain The Next Step of E-Billing?
Technology advances every day, the past few years have shown us the possibilities of artificial intelligence, data science, and virtual reality. That is not all, talk about the fantastic technologies of IoT with smart cars, smart homes, wearable, and even smart cities. All these advancements are overwhelming. Blockchain is another exciting technology that is slowly integrating itself into many sectors of the economy.
Although, it has been here for some time, and it is now showing exciting potential to solve major industrial issues, such as fraud prevention, permanent data storage, and security. Nowadays, blockchain and e-Billing as a combination are also working and making life easier.
When Did the Blockchain Come?
Blockchain entered with Bitcoin in the market, and instantly it gained the attention of the financial services. It was developed to allow smooth financial transactions, and at the same time permanently record digital transactions through a distributed ledger which is almost impossible to hack.
The best part is that this blockchain technology is nowadays serving many industries and providing various advantages of using blockchain for a variety of purposes. It has already proved that it is worth using.
Some of the examples are:
- It helps to reduce the fraudulent activities of the insurance industry
- Some governments are using blockchain to secure IDs (Identification Documents) of their citizens
- Blockchain technology can store millions of health records securely and permanently
- Both doctors and patients can maintain the security of their health details
- Logistics and transportation companies can use blockchain to track their shipments and check out every move of their goods
- In the teaching field, schools and universities can keep the user data and record of students’ grades and coursework on a secure platform
- Most importantly, financial agreements and transactions can be stored permanently on the blockchain technology, so there will never be a question on the blockchain transactions or invoice fraud. Such as you will be easily able to find out whether a payment was made or not by the customer and using which platform
Now Think About The Future of Invoicing
Blockchain technology can also undoubtedly be applied to your electronic invoice processing. It has the potential to change the ways payments are made, invoices are issued, and how transactions are being validated.
Distributed ledgers are based on the blocks; these blocks record every transaction and are therefore the best fit for payment. A document is embedded in a decentralized Blockchain network that can be altered and accessed by various users at once. It is very transparent and tamper-proof.
Each block and record is secured using cryptography, with every transaction visible to every party, therefore eliminating the necessity for an intermediary. The Blockchain technology allows coherent transactions to be made automatically from the customer to the digital wallet of the business.
You will receive purchase orders as a supplier, usually by fax or email. You may or may not have determined an amount before the receipt, but when you agree upon a price, you will have to file the order then ship it off. After doing this, you need to start an invoice processing for the customer with a due date.
Although, if there is any form of discrepancy in either the product received by the customer or the amount paid, there have to be several layers of sorting out and talking to fix whatever went wrong. Human error can occur at any time during the transaction.
Here is Another Option
A purchase order can be entered into a block in a chain. The price will be agreed upon and entered by you. Once that happens, it is forever unchanged. After you fill the order, all you need to do is enter the information on a block then track the shipment. If it involves more than one carrier, all the carriers will enter the details on the receipt, the time and date should also be stamped on the receipt when sending forward. Since both parties know all the details – it’ll remain unchanged.
Your invoice will also be entered into a block based on the agreed price that was recorded. Hence the price will not be tampered with to maintain cash flow.
This process tends to eliminate a lot of problems faced by financial institutions. This includes fraud, theft, disagreements on details regarding purchase agreement, and human error.
This method will also help to reduce personnel costs and is more efficient. If users have currency “wallets” embedded in their Blockchain-based solutions, payment processes can be done immediately without the need for an invoice. This also eliminates the banking function of the buyer and the seller.
Are There Objections?
Of course. Here are a couple of objections raised so far:
A public Blockchain is hackable, Yes. Even if it’s not, users are provided with a key code that might get compromised if they don’t take proper care of it. Also, a hacker might not be able to modify the stored data, but he will be able to access your wallet or add something new to your Blockchain.
Therefore, the security of key codes is very important. They should not be stored in any system but rather, should be stored in external hardware that will only be inserted when in use.
It has too much transparency.
No, it doesn’t. Financial and personal information is encrypted and may not be accessible through a permission-based key. This is because financial and personal information contained in large database systems can be compromised or stolen; just ask the IRS or Target.
But the Benefits are Huge
There is no need for “human trust” with Blockchain-based solutions. The trust is embedded in the chain automatically. This is a huge plus for business relationships with little or no trust often among new business partners in the business world.
Lots of transactions occur between relative strangers online, and the internet can be vile with cases of identity theft, security attacks, and malware occurring once in a while. All these can trick an individual into releasing funds into the wrong hand.
Blockchain technology promotes transparency and can be used to identify all parties in a business transaction, and it is also used to authenticate the agreed price after negotiation. With a Blockchain-based solution, a paper trail is not needed.
Blockchain is one of the fastest and most efficient methods of processing financial transactions. The conventional method of processing financial transactions goes through several processes, and there can be an issue at any point in the transaction. After all, if it involves humans, there will be human error.
Blockchain eliminates almost all forms of human error. All parties will be given access to the live transaction and will be able to verify it at the same time. You don’t have to send any form of an invoice. Blockchain has eliminated all sorts of intermediaries that handle it.
It has an immutable Audit Trail. Blockchain technology helps to store and record every part of a transaction. Each of these transactions is the date and time-stamped as they are being entered into a block. If there is a need to make changes, it has to be by mutual agreement.
The amendments must also be verified by both parties and entered into an entirely different block, which will also be date and time-stamped. This encourages full transparency between the parties and prevents fraud and misunderstandings.
The traditional payment processing method is usually opaque, with almost no form of audit trail available. Debtors can easily use bureaucracy to delay payments or claim their demands are lost or held up. Applied Blockchain technology, TallySticks, and Request Networks are examples of companies that plan to change things by revolutionizing business world invoicing with blockchain-based solutions.
They are trying to envision how Blockchain solutions provide accessibility and accuracy of the information at every step. This provides precise and accurate information for financial decision-makers to determine the amount of money owed and how much they’ll get, allowing them to plan efficiently.
I know it seems quite visionary, but the truth is, it is prolonged. Many businesses have faced lots of challenges while adopting payment processes and the existing electronic invoice.
Therefore, it might take a while before different companies start using Blockchain technology to handle their invoice. Companies should still watch out for this fast-rising technology because it will undoubtedly become a trend in business processes. It won’t stop now.
Is Blockchain a Need?
As discussed above we saw how blockchain can help you dealing with e-invoices. Using blockchain invoice platforms, people can take most of the advantages for storage, circulation, and reimbursement of the financial transactions. Tax departments can accomplish intelligent paperless blockchain-based transactions for the supervision of the entire process, on the other side taxpayers do not need to go through the tax reporting processes. They do not need to purchase any additional software or professional equipment for the same.
Blockchain technologies can help them save labor costs, reduce the possibility of invoice management errors, the chances of information sharing in the wrong way, and avoiding credit rating deductions caused by lost invoices.
The above-mentioned advantages of the blockchain invoices can be achieved by electronic invoices, even the special advantages of blockchain invoices that are advertised against the electronic invoices.
For example, electronic invoices can be copied and printed indefinitely, and the authenticity is difficult to distinguish; whereas blockchain invoices can ensure that invoices are unique. However, in truth, through encryption technology, the electronic invoice can also achieve its authenticity.
Although 90% of the functions of blockchain invoices can be realized by electronic invoices, there are still some functional points that are unique advantages of blockchain invoices. For example, for the supervision unit, the blockchain invoice can track the owner and affiliates of the invoice, and the source, authenticity, reimbursement, and other information of the invoice can be seen.
The information recorded on the chain is more multi-dimensional than current electronic invoices, and supervisory agencies can implement penetrating supervision. For users, through the smart contract of the blockchain, it reduces the hassle between enterprises, enterprises, and individuals, and enterprises and taxation agencies.
Most importantly, after the blockchain invoice is recorded on the chain, it may be possible to produce a digital map that represents the credit of the enterprise. At present, the tax bureaus do not open data to the outside world, and it is difficult for the outside world to know the tax payment situation of enterprises. However, with blockchain invoices, some information can be opened to specific individuals or institutions if the multi-party consensus allows, then corporate tax payment information will gain circulation and even financial asset development.
Blockchain: The Best Way of Digital Trust
If you ever bought a house or apartment, you know too well the lengthy and costly process that goes with it. Without going into the details, the process is very paper-based and involves a lot of different people hence costly and lengthy. It serves the purpose of creating trust by ensuring that:
- the seller is who sells the goods,
- the buyer is who buys the goods,
- the purpose of the transaction indicates what the buyer is buying,
- the seller owns the purpose of the transaction,
- the buyer has the means to pay for the transaction,
- The process records the transactions that happened.
Whenever there is a transaction, there is a transfer of ownership. So, trust is an important factor to make a deal happen. It is precisely the challenge that the blockchain addresses. It is a form of digital trust that speeds up transactions and removes intermediaries. It is why it can have massive implications in the business world as supply/value chains are interconnected and complex.
Blockchain Estimations and ‘Smart Contracts’
Beyond the improvements in visibility that blockchain enables, there is a fascinating computational layer emerging via technologies such as Ethereum. Due to the shared, decentralized nature of blockchain, programs running on it are extremely hard to censor or interfere with. So, deploying a ‘smart contract’ program – perhaps set to make a payment to a specific address if certain conditions are met (e.g. the sale of a house) – creates an assurance of payments when those conditions are met.
It’s easy to see how smart contracts, operating on a blockchain, fit well with the concept of electronic invoicing or e-invoicing in the wider sense. Theoretically, the blockchain could be utilized to validate a transaction, deliver an e-invoice, and facilitate payments, entirely automatically.
Why is Blockchain Important for Electronic Invoicing?
To understand why blockchain represents such a tremendous potential for supply chain management and procurement, it is important to understand some of its current characteristics and future developments.
Blockchain is often described as a distributed ledger or, in other words, as a database logging transactions (exchange of value). Although it is technically correct, this does not serve the purpose of building the case for blockchain technology or of making it’s potential tangible.
Blockchain technology is also being applied to electronics. And it has the potential to revolutionize how transactions are validated, invoices issued and payments made. Still best known as the building blocks of cryptocurrencies such as Bitcoin, these distributed ledgers based on blocks, each of which record a transaction, are a perfect fit with payments.
A document sits in a decentralized blockchain network, which can be accessed and altered – with a record of who made changes and when – by several users at once. It is tamper-proof and transparent. Each record or block is linked and secured using cryptography, with all transactions visible to all parties, therefore removing the need for an intermediary.
Using an invoicing system on the blockchain network will allow for seamless payments made automatically from the customer to a business’s digital wallet. Transactions are easy to track and monitor and the entire history of an exchange can be downloaded from the blockchain.
It all sounds quite idealistic. In reality, uptake is likely to be fairly slow. When one considers how resistant many businesses have been to adopting existing electronic invoice and payment technologies, it may take time before the average company adopts blockchain technology to handle invoicing. But they should watch the progress of this new kid on the block – if you’ll forgive the pun. Blockchain technology certainly looks set to be integrated increasingly into business processes in the years to come.
New Way, New Thinking, New Services
When invoices become immutable, they also become a reliable source of truth. Add to this a few standards and it becomes an interoperable layer, a source of data that everyone understands and trusts.
Soon it will be possible for a company to share its financial data with partners. Why would a company share such critical data? They will not have to share everything. Take a factoring process for example, how does a company get funds in exchange for invoices? By sending copies of these invoices, along with some other information. Financial information sharing can trigger valuable services. Tomorrow, as the invoices are not sent from actor to actor but are securely accessible, the logic changes totally.
It would work like this: a business gives access to its factoring bank for the data it needs: for example, only sales invoices above a certain amount and in the same country. The factoring company is given the keys to access this data. From this moment, they don’t even need to communicate, the factory detects new invoices at the same time as the client and triggers its actions.
If today it is required to provide factors with the whole invoice, on the single source of truth it’s not required anymore. The factory could for example only access the amount and currency, and the rest remains hidden. And as they don’t have to securely store invoices, we could expect the price of such services to reduce drastically.