If you are following blockchain & bitcoin news closely, you must have noticed something about many billion-dollar companies, as well as Fortune 500 enterprises. They have officially jumped onto the blockchain bandwagon and are working around the technology.
There is a simple reason for this.
it is important to understand the implications of blockchain technology for eliminating friction points in contracting. Because of the way the blockchain works, it has unique characteristics. They represent a breakthrough with tremendous value for procurement and CLM cycles.
Contract Lifecycle Management (CLM) unlocks a multitude of benefits via mitigating supplier risks, proactively tracking contract performance, or deriving valuable insights from your static contracts. But that doesn’t mean that the CLM implementation journey is not without its own potential pitfalls. Let’s deep-dive further into ways for eliminating friction points in contracting.
When you use a smart contract-based solution like Trakti, there will no longer be dependencies on inefficient back-office processes and associated turnaround times. Operational risks associated with the movement of resources in and out of businesses –and the respective updates to legal documentation – are vastly reduced. This, in turn, cuts exposures and enhances organisational operating integrity.
Smart contracts in procurement work two ways – streamlining finance functions and enabling transparent communications. The blockchain verifies data and aligns it across entities. The distributed database arranges for a single source of truth between the buyer, the seller, and the other concerned parties, enabling them to get over communication challenges. Such a platform, along with an enclosed record of the transaction, serves as the only uniform source of what the stakeholders want to know.
The role of smart contracts in eliminating friction points in contracting
A smart contract, an integral part of business blockchains, automatically executes certain actions when the pre-defined conditions are fulfilled. This eliminates the human role or brings it down to a minimum. The smart contract can even generate invoices, depending upon the details entered.
For instance, if the agreement provides for payment after 30 days, the smart contract will execute the payment after 30 days.
Implementing blockchain in your CLM cycle can efficiently review and detect the anomalies between the purchase order and the sales confirmation before or upon delivery of goods. In the P2P process, it is a known issue causing friction. Depending upon the time of error detection, the misalignment could result in additional cost or delayed production in case the wrong goods are delivered.
When a business blockchain agrees on the details about an order (place, quantity, time of delivery, etc.), it creates an automated confirmation based on the agreed data, thus eliminating any likelihood of a mismatch.
When it comes to CLM, communication between various business stakeholders is always complex. A business blockchain, however, streamlines communication, infuses transparency, and makes the system automated. It helps detect the anomalies between the purchase order and the sales confirmation, thus eliminating the pain point.
See what Trakti can do for you. Read about our features here.