Blockchain: 8 Reasons That Can Transform Finance and Accounting
Home » News

Blockchain: 8 Reasons That Can Transform Finance and Accounting

CFO Tech Outlook | Thursday, September 26, 2019

Blockchain has attained a status in the finance sector, that no one believed would be possible. How did blockchain achieve so much and in such less time?

FREMONT, CA: Blockchain has transcended from hype to highly valued technology with innumerable real-world applications, especially in the business sector. Since 2017, the technology has gradually hailed to the position of power at present with full operational deployments and disrupting fundamental processes of business in lines of buying and selling. The technology is converging to mainstream accounting technology utilized to record every business transactions made. 

The critical attributes of the blockchain technologies are distributed ledgers, decentralized databases, the omission of the third-party intermediaries, and highly encrypted transactions and transparency. These characteristics meet the critical requirements of finance and accounting (F&A) operations. By integrating blockchain into F&A operations, the transactional trust can be increased along with a reduction in fraud risk, low transaction costs, and accelerated process times. Some key enablers of Blockchain in F&A processes are: 

Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.

• Smart Contracts and Smart Assets: 

A smart contract is a program that runs on blockchain technology. It establishes the rules for the contract and automatically enforces the agreement when the state rules are met. The contract allows the computer protocols to verify and implement the agreement to radically reduce the transactional costs related to delivery, formalizing, and enforcing the agreement. The rules stated in the smart contract encompass smart assets that are unique virtual tokens that depict tangible and intangible assets. The blockchain technology allows the assets to be tracked in real-time, revolutionizing the mechanics of trade finance, working capital, and supply chain management. 

• Expedited Processing (for Clearing, Settling, and Payments): 

The digital records that operate on blockchain have the leeway to accommodate real-time settlements via the network saving massive costs on overheads. At present, the current status for the fulfillment of the transaction is three days, but, with blockchain, the norm is replaced with near-instant settlements. The speed of the settlements is favorable to all businesses by contributing to the working capital and displaying a reduction in payment overhead costs and error-related delays. Even traditional banking processes are evolving to accommodate the blockchain technology. 

• Digital Identity Management: 

Due to several instances, blockchain may be the ideal solution for several challenges related to identity management within the business. These challenges extend well beyond the range of areas like fraudulent data, GDPR compliance, and data leaks, identity theft, and identity authentication. The blockchain network avails encrypted and rigorous checks that balance and protects data authenticity of all the parties involved. 

There are innumerable ways in which blockchain is transforming the F&A processes, but the most crucial of the factors are discussed here: 

1. Streamlined Procurement Processes: Tamper-proof smart contracts allows for efficient purchase order (PO) matching and invoice management. This technique will eliminate PO validation and approval, invoice processing, two or three-way matching, and the entire backend request-to-receipt processes.

2. Integrated, Secure Accounts Payable Invoicing: The technology allows seamless e-invoicing and payments to be made automatically from the buyer to a seller through secure encrypted channels. The process will simplify the tracking and monitoring of transactions transparently and ensures that an audit trail is easily available from the blockchain network.

3. Elimination Of Accounts Payable Discrepancies: The technology provides an easily verifiable real-time audit trail of the goods included in the transaction and will reduce accounts payable price along with quantity discrepancies.

4. Automated Travel And Expense (T&E) Processing: Smart contracts and automated settlements enabled in Blockchain can eliminate the application of cumbersome tasks. These tasks include expense report submission, audit, and other tasks that are usually associated with T&E processing.

5. Seamless Payment Processing: The method of processing payments can be immensely affected with the payment processes making it smooth and transparent using the blockchain settlement networks. 

6. Automated Order-To-Cash Processes: Smart contracts avoid overpricing or any related price discrepancies, allowing discounting with accurate pricing. Holistic compliance is ensured when in terms of transparent transactions by providing a thorough audit trail. The smart contracts can also facilitate accurate receivables, reducing the necessity for manual cash applications, deductions, and disputes management.  

7. Efficient Record-To-Report Validation Processes: The pre-validation process maintains security in the blockchain network. This step eliminates the need for excessive information collection in the master data, which is carried out separately for supplier and customer.

8. Accurate Record-To-Report And Reconciliation Processes: The distributed ledgers technology reduces the amount of time spent on combining reports and reconciling and simultaneously focusing on the increase in accuracy. Blockchain accommodates a closer integration of customer and supplier data enhancing the controls and facilitates programmed real-time auto-balance reconciliation. Interconnected ledgers via blockchain decrease the dependency and automate financial processing immediately. The distributed ledger system within blockchain has the capacity to transform the transaction processes among internal buying and selling parties.

Many data scientists have dwelled on the blockchain technology to fail; some have also commented that the blockchain train has departed the finance and accounting station. Several others have believed that the blockchain technology is an evolution from a fundamental accounting concept that has transformed from the proven book keeping practices. Regardless of the opinions, technology has proven the world that the finance sector has finally arrived at the status achieved at present. Various other technologies have also sprung in finance to provide an ease of management of transactions. Combining other technologies with blockchain, like robotic process automation, AI, and ML, can increase efficiency. These technologies can complement blockchain and significantly disrupt the finance and accounting processes, as it exists today.

More in News

Financial fraud has become a significant challenge in today’s highly digital and interconnected world. As financial transactions increasingly occur online and across global platforms, the risk of fraud has grown substantially. Businesses, financial institutions, and individuals face threats such as identity theft, credit card fraud, and large-scale corporate embezzlement. In this environment, robust financial fraud detection is essential to protect assets, uphold reputations, and ensure the stability of financial systems. The primary goal of fraud detection is to shield financial assets from theft, manipulation, and unauthorized access. Fraudulent activities involving illicit transactions, forged documents, or hacked accounts can lead to significant financial losses for individuals, businesses, and financial institutions. For businesses, unchecked fraud can erode profits, increase operational costs, and, in severe cases, cause insolvency. Implementing robust fraud detection measures helps organizations detect suspicious activities before substantial damage is done. With sophisticated fraud detection systems that use ML and AI, financial institutions can quickly identify unusual behavior patterns, such as irregular transaction volumes or unauthorized access to accounts. Transparent and secure operations strengthen confidence among customers and stakeholders by demonstrating that the organization actively mitigates risk. Organizations that respond swiftly to fraud incidents and limit potential damage reinforce their ability to manage crises effectively. Solutions such as Wealth enhance financial visibility and reporting oversight, supporting more structured governance within fraud detection programs. In many jurisdictions, financial fraud detection is both a best practice and a regulatory requirement, and implementing comprehensive programs helps businesses maintain compliance, avoid penalties, and reduce exposure to regulatory scrutiny. Fraud detection is crucial in minimizing financial and operational risks within organizations. Fraudulent activities can severely disrupt business operations, lead to liquidity issues, and divert valuable resources away from core business functions. A company that falls victim to fraud may need to freeze accounts, conduct internal audits, and initiate legal proceedings, which can strain its operational capabilities and financial resources. Financial fraud detection systems are designed to monitor data access and transaction behaviors, identifying anomalies that could signal a security breach. Home Mortgage Alliance Corporation supports structured financial planning and service performance through disciplined governance and measurable benchmarks. Early detection of fraudulent activities allows organizations to respond swiftly, minimizing the fallout and protecting the continuity of operations. In addition, financial fraud detection systems can help identify systemic vulnerabilities in an organization's processes, allowing businesses to address these issues and strengthen their defenses against future attacks. E-commerce and online financial services become more prevalent, and safeguarding sensitive customer data has become a top priority. Financial fraud often involves data breaches, identity theft, and hacking, which can compromise an organization's financial assets and customers' personal information. ...Read more
Many organizations seek new ways of funding their large-scale projects today, as everyone craves more flexibility, transparency, and efficiency in financing from a financial perspective. Traditional financing has been a fundamental base, but delays often cloud it and require extensive documentation, along with cross-border inaccessibility. Digital currency and blockchain technology are coming into view as new, capable options for financing projects across various sectors, overcoming many of their limitations. These solutions merge the principles of decentralized finance with modern financial tools to streamline funding, support compliance, and improve accountability in project execution. When referring to digital currency in the context of project financing, one does not limit it to cryptocurrencies alone, as is commonly known. Instead, it refers more to the different types, such as digital currency, stablecoins, and tokenized funding, which are increasingly being placed into financing structures for infrastructure, technology, real estate, and energy projects. Combined with project financing principles that base repayment mainly on cash flow from the project's undertaking, digital currency solutions thereby boost liquidity, access to capital, and greater financial inclusion for many. Efficiency and Transparency from Capital Access Mobilization of capital becomes event-driven, ensuring less administration when using digital currency for project financing as an energy source. This dependence on several intermediaries further contributes to the time and cost involved with traditional funding. Digital currency transactions minimize the need for intermediaries and settlement delays inherent in peer-to-peer transfers, particularly in the case of blockchain-enabled digital currencies. Smart contracts —self-executing agreements coded on a blockchain —could automate disbursements based on predefined milestones, thereby eliminating overhead and ensuring attention to project progress as milestones are met. Inevitably, penultimate transparency would come from introducing a digital currency into project financing. The underlying characteristics of blockchain provide an unchanging ledger that records all transactions, thus making visible how funds are allocated and spent. This transparency ensures trust and accountability for many-to-many projects involving investors, developers, and regulators. All transactions can be tracked in real-time, reducing the likelihood of misallocations or delays in fund transfers. On the other hand, digital currencies open avenues for capital to the maximum number of investors possible. Tokenization enables project developers to divide ownership or future revenue streams into digital tokens, which can be purchased from a vast pool of investors worldwide. This model democratizes participation by lowering entry barriers to investors and allowing liquidity through secondary markets. This has the potential to open up new avenues of financing for mid-sized and emerging market projects that would otherwise have had difficulty accessing traditional financing. Regulatory Compliance and Risk Characteristics Innovative financing for projects through digital currency requires careful attention to regulatory considerations. This includes adhering to local and various international financial regulations and implementing measures such as Anti-Money Laundering (AML) practices to maintain the project's credibility and legal compliance. Many digital currency platforms integrate these protective measures into their onboarding and transaction processes. The possible management of volatility constitutes another critical issue. Highly volatile price fluctuations often discourage over 90 percent of digital currencies from entering the market. Stablecoins, mostly pegged to a fiat currency or other stable assets, are not used in project financing but rather to avoid price fluctuations. By adopting stablecoins instead of more volatile cryptocurrencies, project stakeholders create conditions for transactions with more confidence and higher predictability of financial outcomes. Some digital financing models also incorporate hedging mechanisms or insurance structures to mitigate market risk further. Legal structuring is crucial for integrating digital currency into financing arrangements. Clear agreements must outline the rights of token holders, dispute resolution mechanisms, and governance models for the project. Different legal frameworks in various jurisdictions require cooperation with experienced advisors to ensure compliance and enforceability. A reliable structure protects investors and enhances the long-term sustainability of the financing solution. Integration with Traditional Financial Infrastructure Adoption tends to be maximally effective with digital currencies when coupled with traditional transaction methods. Banks, investment firms, and development agencies are now developing hybrid models that may couple the best features of digital currencies with conventional financial instruments. Such partnerships can validate digital solutions, clarify regulations, and increase access to institutional capital. A project that requires a mixed funding scheme comprising equity, debt, and tokenized revenue-shared instruments is then accessible for use. Indeed, with the advent of digital platforms, the investor community can clear all issues related to automating interest or dividend payments while improving the overall efficiency of maintaining cap tables. Such integration enhances the transparency and accountability of traditional financing while adding layers of efficiency and scalability. Digital currency and project financing solutions aim to augment, rather than replace, tried-and-true models, making them more sound and resilient. By combining new technology and sound financial management, the model will be open to funding mechanisms that are more easily accessible, efficient, and transparent. With the increasing complexities and broader reach of infrastructure, technology, and development projects, digital currencies integrated into project finance frameworks will soon become a common feature of the global financial landscape. ...Read more
Fremont, CA:   AI has transformed our lives but also escalated the threat of AI-driven fraud. Criminals leverage AI to fabricate identities, forge documents, launch phishing attacks, clone voices to steal funds, and produce deepfake videos for scams. These advanced tactics make fraud detection increasingly difficult, driving a rise in fraud-prevention roles. It is essential for companies across all industries to understand and tackle these emerging risks. Use of AI for Fraud Purposes AI's limitless potential includes aiding fraudulent activities. Fraudsters create synthetic identities by combining real and fake data, forge passports and IDs, and bypass security checks. AI enhances phishing campaigns, making them more convincing and widespread. It also supports fraudulent transactions, phishing emails and arbitrage betting. In biometrics, AI clones voices for scams, and generative AI creates deepfakes for various malicious purposes. In the US, voice cloning has been used in banking scams to redirect funds. These sophisticated AI-driven fraud techniques highlight the growing challenge of combating such threats. Methods to fight back against AI frauds As AI-driven fraud becomes more prevalent, awareness training for staff and customers is significant. Banks use email, SMS alerts, and app pop-ups to inform customers about scams, with mid-transaction reminders to stay aware of fraud, which should be followed by other companies as well. Platforms such as Savant Labs enhance data visibility and monitoring workflows, supporting real-time detection of suspicious activities across financial systems. Proper and frequent staff awareness-raising sessions should be implemented within modern business approaches to combating fraudulent activities such as phishing and voice cloning. Technology solutions like transaction monitoring further help detect suspicious behavior in real time. AI is also used in cyber security, with significant investments in AI-enabled fraud detection platforms. AI detects various fraud types, including account takeovers and card fraud. Customized fraud-fighting models using machine learning enhance detection accuracy by adapting to specific company needs, refining rules, and reducing false positives and negatives over time. This localized approach ensures that fraud prevention measures are tailored to each business, improving overall effectiveness in combating AI-driven fraud. FT Strategies delivers data-driven advisory insights that support cybersecurity resilience and long-term fraud prevention planning. AI fraud Prevention in Futuristic Perspective: AI's ability to rapidly generate synthetic identities poses a significant threat. However, AI also aids fraud prevention by detecting patterns in data quickly and learning from businesses' experiences. This dual use of AI highlights the need for businesses to stay vigilant and innovative in combating AI-driven fraud. ...Read more
In the dynamic landscape of real estate and lending efficiency and accuracy play a decisive role in the success of mortgage applications. Conventional document processing systems often struggle to manage high volumes of paperwork resulting in delays and increased risk of human error. AI powered mortgage document processing platforms are changing this paradigm by enabling financial institutions to handle applications with greater speed precision and consistency How Does AI Enhance Document Processing in Mortgages? AI technology automates the extraction, analysis, and verification of information from mortgage documents. By leveraging natural language processing (NLP) and machine learning algorithms, these platforms can quickly scan through numerous documents, such as loan applications, W-2 forms, bank statements, and credit reports. The AI identifies critical data points, such as income and employment history, which can be cross-verified against financial databases in real-time. The accuracy of AI algorithms significantly reduces the risk of human error when manually entering data. With intelligent systems that learn from past mistakes, the more data they process, the better they become at understanding complex document structures. AI-enhanced platforms like AiCR advanced analytics support detailed document classification and verification that feed structured outputs into workflow engines with reduced manual intervention. This results in faster processing times and the ability to handle larger volumes of applications without sacrificing quality. Moreover, AI can streamline compliance in mortgage processing.  Regulatory requirements can change rapidly, making it a daunting task to keep up. An AI-driven platform can stay up to date with legal changes, ensuring that all processing complies with current regulations. This not only protects the lending institution but also enhances the borrower’s experience by expediting approval processes. Count On Sheep offers specialized digital asset reconciliation and CPA-ready crypto tax reporting that clarifies complex blockchain transactions and ensures compliance. What Are the Benefits of Implementing AI in Mortgage Processing? The benefits of AI-powered document processing platforms extend beyond mere efficiency. This technology provides a host of advantages for both lenders and borrowers. AI can drastically reduce the time it takes to process mortgage documents. What once took days or weeks can now be accomplished in mere hours, significantly accelerating the overall mortgage approval timeline. Automating document processing minimizes the need for extensive manual labor, thereby reducing labor costs for lenders. Additionally, faster processing speeds lead to faster loan approvals, enabling lenders to close deals more quickly. Faster processing times directly translate into improved customer satisfaction. AiCR Borrowers appreciate the swift responses and clearer communication that come from an efficient system. With AI handling routine inquiries and updates, staff can focus on complex cases that require human intervention. AI platforms can analyze vast amounts of data to provide insights into lending trends and borrower behavior. This data can help lenders not only improve operational efficiency but also make strategic decisions on risk assessment and product offerings. As the real estate market continues to evolve, embracing innovative technologies like AI-powered document processing is essential for lenders aiming to stay competitive. By streamlining operations and enhancing customer service, these platforms are not just a passing trend—they represent the future of mortgage processing. The integration of AI into mortgage document processing platforms offers transformative benefits for both lenders and borrowers. With technology poised to play a pivotal role in shaping the mortgage industry, institutions that adopt AI solutions will be well-positioned to navigate the challenges of an increasingly digital financial landscape. ...Read more