Known as the technology behind Bitcoin, blockchain can be applied in a wide array of applications for business, not just limited to only the cryptocurrency arena. Even though still in its infancy, blockchain technology is believed to redefine the finance function.
Digital Transformation is becoming the norm for modern businesses. Blockchain is a significant component of this digital trend, a disruptive technology that has the potential to revolutionise the entire financial world. Thus, the role and vision of CFO is expected to shift as a result.
Why should CFOs concern with blockchain?
In essence, data, when stored using blockchain technology, will be fragmented into multiple pieces, which will then be dispersed among the blockchain network. Each data block is encrypted, and only the owner has the key to decode and access the data. This creates an extremely secure environment for your valuable information, prevents any possible fraud, disaster or deletion to occur.
The traditional role of a CFO encompasses three key areas: execution, enablement, and development. Blockchain has the capabilities to make an impact on every area, equips the CFOs with the necessary tools to make better decisions, meet organisational objectives and obtain better visibility.
Enhanced execution and enablement with improved transparency
One of the many utilisations of blockchain technology is the creation of “smart contract”. As the name implies, the logic built in a smart contract enables it to automatically act upon set agreements when needed. Furthermore, it is also possible to track and validate the data right at the source. This further ensures every transaction is impossible to tamper with as well as it is accurate and well-maintained through a shared ledger.
Read more: Turning data into smart data
As the transaction is already validated at the source, every movement in the transaction is reflected instantly through the shared ledger. The shared ledger function is also useful for reconciliations between departments, or intercompany transactions, to be done in a near real-time manner and simultaneously.
Insights from finance function can be feed to the analytics department to expand the values beyond the CFOs wall and reach other key strategic and operational functions to respond quickly and make timely decisions.
Empower better financial decisions and development
The process of financial plan development can be improved using blockchain. Finance assets once embedded in the blockchain environment provide a single, digital source of the truth. The entire life cycle of the assets, their interactions with each other, or the change in ownership is recorded and reflected automatically, instantaneously.
As the firm’s assets are recorded in real time, finance function can access to insights of the market value in addition to the book value of the firm. Utilising a combination of private and public blockchain will allow organisations to track all transaction and share only the most relevant data to the market. With such valuable insights, the CFO can reallocate the funds to areas that can maximise the return on investment.
Financial transaction and performance tracking in conjunction with cost saving (due to blockchain enable process automation) gives the finance department more free time to focus on more critical missions such as strategic planning, organisation-wide decision making, particularly during the consolidation process, which in turns leads to maximised organisation’s return on investment.
Read more: When CFOs take over the role of COOs
The accurate snapshot of the organisation’s current finance movement can significantly boost the confidence of the investors, auditors or any interested parties. With the ever-changing market demands, economic landscape, and digital evolvement, there will be a future where blockchain immerses even deeper in a wide array of business applications that improve every aspect of the finance function.
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