Procure-to-Pay Process – The Blockchain Way

by Sofocle Admin

Procure-to-Pay Process – The Blockchain Way

by Sofocle Admin

by Sofocle Admin

Blockchain, the technology which made the secure exchange of Bitcoins possible is disrupting many industries. It aims to digitalize processes and create a digital identity of physical objects on the Blockchain, so these can be tracked as well as traced back to the source of their origin.

Blockchain technology helps reduce the inefficiencies in today’s P2P transactions. When two businesses do transactions with each other which involves the exchange of money, the process is not so simple. Let’s try to visualize this process.

Business A wants to purchase a product from Business B.

  • Business A prepares a PO (Purchase Order), record it and send it to Business B. Business B, in turn, records it in the form of Sales Order.
  • Business B then delivers the product to Business A and take the confirmation in the form of Delivery Note. Business A keeps a record of Delivery Note in the form of Goods Received Note (GRN).
  • Now based on confirmation of delivery, Business B sends an invoice to Business A. Business A then checks the invoices against the PO and GRN and then approves the payment.

The above-mentioned set of activities comes under the process called Procure-to-Pay (PTP). It is a multi-channel process that connects a client with one or more service/product providers and allows for identification as well as authentication of stake holders, invoicing, payment settlement, etc. The businesses follow such a lengthy and inefficient process to make sure that everything matches since they don’t trust each other. They need to have concrete proofs to account for things and record them.

Some of the limitations of above process are:

  1. Maintaining 2 paper based copies of the same transaction by the client and the supplier is cumbersome. A Purchase Order for a Client and a Sales Order for the supplier represents the same thing. Yet they are stored in different ledgers and both the parties need to ensure that the terms mentioned are same in both the documents.
  2. Most organizations use multiple ERP systems, which further makes it difficult to have a single and integrated source of truth for supplier and business data.
  3. Several processes require manual intervention, thereby resulting in cost inefficiencies.

PTP over Blockchain

PTP Process over Blockchain

Now visualize a situation where we record all of these steps of the PTP process, not in separate ledgers, but in a single ledger – a Blockchain – an indisputable set of records that can be trusted by both the partners, so that they don’t need to trust each other. In such a scenario, there would be no need to have a physical invoice or a sales order. They would become redundant.

Some of the key benefits of implementing Blockchain for the Procure-to-pay process are as follows:

  1. Authorization of Vendors: Blockchain Apps have a developed front-end system for authorizing vendors, placing a purchase and defining new catalogs.
  2. Improves Authentication and Validation: Blockchain technology can enable quick distribution of authentication rights along the Procure-to-pay chain, helping in prevention of fraud and improving security.
  3. Accelerates Sharing of Purchase Order: Purchase order and receipt data can be exchanged on the Blockchain at a quicker pace when compared to current system.

Sofocle’s Blockchain-based supply chain management product – ‘sofoChain’ bring various stakeholders involved in supply chain process on a single platform to bring transparency to the overall process. For further information on how Blockchain can be used for Supply Chain related processes, contact us at [email protected]

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