Finance: 5 years predictions and the role of Blockchain

New business models, intelligent contracts, high degree of automation, real-time information, roles adapted to new trends, ... and all in less than 5 years.
In fact it is already happening. Many organizations are already not only defining, but executing a medium term transformation plan that includes optimization of financial processes, automation, talent incorporation and innovation.
In the financial area, the process with the greatest margin of optimization is Source to Pay. In addition to its clearly transactional nature, it normally accounts for 70% of the total cost of financial processes and has a clear impact on key indicators such as the working capital.

5 years Predictions

Let's see what are the expected and most widely agreed trends for the next 5 years.

1. Automated financial transactions: RPA, IA tools are already giving results and Blockchain will play an essential role in the coming years.

2. Real time Information: the complex reports obtained with a predetermined frequency, integrating "cross" information from different systems and with a high degree of manual intervention will be replaced by real-time information, in line with internal requirements and the market. This will be a competitive advantage, since the decision making will be much more agile.

3. New business models: the dilemma between offshore / onshore models and automation is raised.
Many organizations choose between outsourcing or internal (centralized) operations and process automation. The fundamental error lies in thinking that they are exclusive options, since the optimal option is a combined model.

4. Technological models: the most acclaimed trend is an ERP Cloud option, but it is necessary to incorporate concepts such as SaaS, PaaS, IaaS to understand what type of model can best be adapted to each organization based on its internal requirements, customization opportunities, flexibility and cost.
Keep in mind that around the ERP, you can incorporate specific applications (especially if we think of automation) and here the flexibility factor will be fundamental.

5. What talent will need to be incorporated into organizations?. It seems clear that it will be key to have roles that provide technological, business and processes knowledge, capable of connecting siloed processes and applications. An appropriate combination of technological, functional and strategic roles will be key in the success of the transformation.

And all this, applied to financial processes, is translated into...?.

1. Operational efficiencies: if we talk about process optimization, Blockchain will be key, especially in cases with inefficiencies derived from discrepancies. Surely we already have in mind the contractual discrepancies (prices, quantities, quality).
2. Reduction of the financial risk of transactions, facilitated by the elimination of intermediaries and the generation of direct operations.
3. Information in real time, thanks to the consensual registry inherent in this technology.
4. Intelligent contracts between the parties.
5. Traceability and increased transparency, thanks to unalterable records.
6. Direct reduction of costs (especially intermediation).

Its applicability in the different financial processes is beginning to become clearer, but let's see some examples:

• Source to Pay: approval, tracking, billing and closing of the purchase order, will be fully automated processes. The same will happen with the resolution of discrepancies between the parties, differences in price, quantity, etc. The payments will require a shorter time and cost and the end-to-end cycle will be clearly reduced.

• Order to Cash: applicability to sales contracts and their follow-up. The claim of pending payments will be a nonexistent task or reduced to the minimum expression.

• Intercompany: transactions will be settled automatically.

• Record to Report: reconciliations will probably be unnecessary since each transaction will have an identical counterpart. And also the information will be generated instantaneously thanks to the fact that the transactions are also completed in real time.

• Treasury: clearly, transparency will increase and bank costs will be reduced. The concept of forecasts will become immediate and much more reliable.

So, it seems clear that the role of Blockchain will be essential to the execution of the predictions, although we can not forget that the differentiating element will be found in the optimal combination of the transformation strategy, acquisition and development of talent, and technology.