There has been much hype around Blockchain, the accounting technology hailed by the World Economic Forum as Technology Pioneer. Let’s try to unravel the technology that has been termed as “the next best thing after the Internet.”
A Blockchain is a decentralized distributed ledger maintained by a distributed network of computers that requires no central authority or third party intermediaries. It consists of three key components:
- a transaction,
- a transaction record, and
- a system that verifies and stores the transaction.
The blocks record the information about when and in what sequence the transaction took place (timestamps). The “blocks” chronologically store information of all the transactions that have taken place in the chain, thus the name Blockchain.
With Blockchains, each block references the previous block, not by ‘block number’, but by the block’s fingerprint (hash) which is determined by the block’s content, thus making it practically immutable, with no tampering or revision allowed. Blockchains can be public or private. All blocks are encrypted and can only be read by using the correct decryption key.
With the inherent decentralized nature, security and inbuilt resistance to tampering, Blockchains are ideal for recording and retrieving financial data and becoming the single source of truth for any organization.
ERP and Blockchains
A recurring issue highlighted by ERP users has been the agility of ERP systems. It can take hours, if not days, to generate a consolidated financial report or carry out any analysis. This is primarily due to centralized database structures and legacy security protocols which are not optimized for speed and dexterity.
One of our customers from the aviation industry was facing this exact problem with their legacy ERP system. With 8 offices, 6 of them being warehouses, and over 30,000 unique items with each item coming with serial, batch and warranty, they were running a complex business. The main challenges they faced with the legacy ERP system were:
- Handling data entry and retrieval from each office/warehouse in real time
- Consolidating weekly data from multiple warehouses and offices took more than 3 days due to multiple databases which acted as first point of entry and then were consolidated in the centralized database
- Generating reports from consolidated data took 1-2 days to process
- Consolidation of data was not accurate due to challenges in time consolidation
- Batch processing was required
- Data integrity was always in question as data was first stored in silos and then consolidated at multiple levels
The overall scenario was as depicted in the following schematic:
Deskera, with its use of Blockchains and Cloud, solved the problem for the client as depicted in the following schematic:
The above solved the need to maintain multiple local centralized databases as well as the consolidated centralized databases while at the same time ensuring real-time, sequential flow of information seamlessly across the organization. This leads to the following wins for the customer:
- Faster processing times as data does not have to go through multiple layers
- No chance of data corruption or breach of data integrity
- The encryption keys ensure data security and restricts access where required
- No batch processing required
- Faster generation of reports as all data is captured in real-time and timestamped
- Cloud based access means system can be accessed anytime from anywhere
The above model is highly scalable and can be used to solve other real life problems faced by organizations and industries, for example, audit firms.
Financial Institutions and other industries
By using Blockchains, Deskera can help reduce operational costs by an order of magnitude for financial institutions, for example, audit firms. By capturing each client’s transaction in real time on the Blockchain, auditors have real-time access to relevant financial information, which can be retrieved anytime in a matter of seconds. This is vastly different form the current scenario wherein the auditor only gets access to the client data at the end of the financial year, leading to delays in closing of accounts.
With Deskera, a win-win situation is achieved as clients do not have to wait for long after the end of the financial year to close the books, and auditors can handle and service more clients with the additional bandwidth acquired due to efficient and timely processing of their accounts.
Industry leaders and experts consider the impact of Blockchains to be as significant as the introduction of double entry in accounting over 500 years ago. In addition to being faster and more agile than existing schemas, it also allows complete transparency in accounting as each transaction is captured in real time with timestamps in a sequential order. Consequently, Blockchains are emerging as the platform of choice for eGovernance.
By moving to a decentralized system, Deskera allows organizations to overcome bottlenecks created by legacy installations. With Blockchains, Deskera allows unlocking capabilities for cumulative predictive intelligence and dynamic supply management with multiparty memberships among other things, leading to truly multi-dimensional online B2B and B2C ecosystems.