In 2017, the UK’s annual fraud indicator showed that fraud costs the country £190 billion per year, which is about £10,000 per family. A big chunk of this is due to frauds that happen at different points in the procurement process in different organizations. Procurement fraud is when someone does something wrong to get something they don’t deserve. Like avoiding a debt or stealing or rerouting money during the process of buying goods or services. Even though digital technology and blockchain has improved, these wrongdoings in the procurement process are still not stopped. The organization won’t be able to grow as fast if the procurement process isn’t working well.
What does Blockchain mean for the Business Procurement Process?
A reliable blockchain development company provides the best ways to build an efficient procurement system. Because this technology has features that make transactions cheaper, cut out middlemen, stop fraud, and make everything clear. With this technology of an unchangeable digital ledger of economic transactions, problems in the procurement process can be solve.
Let’s look at the pros of building a procurement system on Blockchain:
Transparency to Build Trust
As was already said, the biggest problem for procurement professionals is that they can’t trust each other. Along a procurement supply chain, data can be change or manipulat as it moves from one party to the next. For example, putting a few extra zeros on a bill is a dishonest way to make more money. Even though the internet has changed the way people do business all over the world. People still have trouble trusting it when it comes to money. Blockchain gives us a way to do transactions without trusting anyone. This means that the trust of running a system is not given to a single entity. For something to happen in the system, most of the people who are part of it have to agree on it.
A blockchain-based procurement system keeps track of who bought what and how much they paid for it. And this information is kept in the decentralised, unchangeable network so that everyone can see what’s going on with the transactions. Still, fraud transactions can happen, but the person who did them can’t hide because everyone in the network can see them. As a digital fingerprint, a new record or block is add to the chain whenever a new transaction or change is made. This makes it impossible for the fraudster to change the data, since every system is notified when a transaction happens.
Better Invoice Management
The blockchain technology helps manage bills by making sure that a bill can’t be change at any time. As long as everyone is registered in the digital ledger, transactions are saved and an audit trail that can’t be changed is kept. Since both the supplier and the customer have to verify the transactions, no one will be able to change the invoice for their own benefit. When smart contracts are used in a procurement process, invoicing can be done automatically so that people don’t have to do it and mistakes or frauds are less likely to happen. For example, when a shipment arrives at its destination, an invoice can be automatically send to the recipient. This can also save the stakeholders a lot of paperwork, time, and money. This technology is already being used to stop money laundering and the use of blood diamonds.
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Transactions That Go Faster
Transactions in cryptocurrency don’t care about borders or locations. The money can be send from one person to another in a few minutes, and there are no (or almost no) transaction fees. This can help an organization’s procurement department get the money it needs to buy goods, services, and other things. The blockchain gets rid of all middlemen and makes it faster and safer for payments and transactions to be processed.
The way an organization buys things takes up a big chunk of its spending chart. Having a fraud-free procurement system in place can help a business stop scams and fraudsters from taking their money. With blockchain technology, we can now imagine a supply chain and procurement system that is almost perfect and free of fraud. This could help organizations grow faster.