November 16, 2020 | Written by: Alan Dickinson
Categorized: Blockchain development | Blockchain explained | Blockchain in financial services
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Every industry experiences a productivity hit when discrepancies arise around financial settlements. In the supply chain, for example, processes that may even be part of an automated procure-to-pay workstream grind to a halt when an invoice and the related goods received documentation don’t match up. Even data-driven industries like telecommunications are affected, with hundreds of mobile carriers having to reconcile billions of records for mobile roaming charges and associated fees.
When records from the various parties disagree, transactions get kicked out to an analyst for manual handling. Both sides then have to spend considerable time and effort working toward resolution. That takes people away from what can really add value to an organization, like analyzing data to improve processes.
Moreover, the working capital impact is significant. To reduce risk and make sure cash is on hand to cover errors that typically are resolved months down the road, companies hold millions, if not hundreds of millions, in reserve. Even though disputes typically comprise only a very small percentage of all transactions, a small improvement in the dispute resolution process can deliver a big payback.
Deploy the IBM Blockchain Platform across multiple environments
Proven benefits of a blockchain-based invoice reconciliation and dispute resolution solution:
- Quicker resolution of disputes
- Labor cost savings from manually resolving disputes
- Lower risk of disputes not reconciling properly
- Less cash reserves tied up waiting for dispute resolution
- Better relationships with value chain partners, suppliers and customers
There’s a better way to resolve disputes. How does it work?
We at IBM Blockchain have a replicable solution that transforms dispute resolution between multiple parties. The heart of the solution is a blockchain network that serves as a single source of truth that is visible to permissioned parties. The engine that drives the solution is automation, enabled by smart contracts and agreed-upon business rules.
Here’s how it works. Participants send process data to the blockchain directly from their systems of record, granting visibility to selected participants (and to no one else, preserving privacy in an environment where multiple parties are participating). This approach also avoids errors that come from manual data entry processes.
Business logic identifies discrepancies between data elements and documents to determine the root cause of any dispute. For example, in the supply chain, is the discrepancy due to a unit of measure error, or a delivery location error, or the quantity delivered? For roaming charge settlements in the telecom space, everyone needs to agree on data, text and voice consumed and rates to be charged. All comparisons are performed on a near real-time basis as new data becomes available. As a result, disputes are identified and acted upon as they occur, dramatically reducing dispute resolution cycle time.
Automated dispute resolution rules synthesize the discrepancy data to reach consensus. This decision, along with the applied rules, is made visible to all required participants. Final consensus decisions are then sent back to the system of record. All data, discrepancies and resulting decisions are stored within the blockchain distributed ledger to create a comprehensive, immutable audit history.
Invoice reconciliation and dispute resolution in retail: Establishing a foundation for better supplier relationships
One company that took advantage of our customizable dispute resolution solution is Home Depot. Both the company and its participating vendors are able to see the same data at the same time, and resolutions can be handled quickly. But the real benefit to a retailer is stronger supplier relationships.
The company is currently realizing a 65 percent reduction in disputes as well as seeing dispute resolution times of just days instead of weeks or months, which creates supplier relationships strengthened by collaboration and trust. Building on that success, the company is now scaling to hundreds of partners over time and adding new use cases that will continue to drive better relations with suppliers.
Invoice reconciliation and dispute resolution in telco: Automating and optimizing clearing and settlement of mobile roaming charges
Syniverse, a global mobile network and technology solutions provider, operates the world’s leading international roaming transaction clearing and settlement service with support from IBM Blockchain. The service offers mobile operators a robust set of cloud applications to manage roaming, from data collection over clearing and settlement to cash, processing 263 billion records and 3.4 million invoices annually.
Included are applications that employ blockchain and smart contracts to automate workflows, applying business rules to the settlement process, surfacing discrepancies and in many cases settling them in the network. Blockchain also provides immutable storage of contractual terms and agreements and other transaction documents, making all necessary reconciliation data immediately available to both parties when human intervention is required, speeding resolution and avoiding weeks of research and back-and-forth via email just to confirm already agreed to terms and rates..
Syniverse and IBM recently upgraded the production platform to comply with the new GSMA Billing and Charging Evolution standard and to accommodate IoT data and 5G. This platform, built on IBM Blockchain Platform, is adaptable to other business opportunities for Syniverse in industries that require settlement and clearing services.
Invoice reconciliation and dispute resolution in your industry: Build on our experience and assets
I noted earlier that this dispute resolution solution is replicable. By that I mean we have built it already for existing clients and can recreate the solution quickly for other companies and their partners. Assets such as business rules and logic, templates for user interfaces, APIs for systems of record and the like can be customized for companies in any industry, based on how they want to do business together.
By taking advantage of an existing customizable solution and the expertise of IBM Blockchain Services, companies can progress from design to working pilot in as little as three months. After applying learning from the pilot to hardening the infrastructure, you can begin to scale by adding new participants to the network.
The solution itself is built on IBM Blockchain Platform, which is a value-added commercial distribution of The Linux Foundation’s open source Hyperledger Fabric. IBM Blockchain Platform is cloud agnostic, so it can run in any cloud or on-premises. Each party in the blockchain network can maintain their data on the IT infrastructure or 3rd party cloud vendor of their choice. The platform is GDPR compliant, so it is ready to support global business relationships.
In supply chain applications, this solution also offers a foundation for extending into new functions in the procure-to-pay arena and beyond. For example, vendors can share real-time views of inventory levels, the network can track returns, and carriers can join to expedite freight claims and update shipping status. Upstream, founding companies can use rules-based automation for alignment of purchase order, sales order and shipment notifications.
If you are in a business that is looking to accelerate dispute processing, reduce manual processes, or reduce the cost of reserves held for dispute resolution, blockchain offers significant advantages. It addresses privacy and compliance, can scale to handle very high volume workflows, and provides an immutable audit trail. Talk to us about how we can build an invoice reconciliation and dispute resolution network for your business.
This use case telling the story of Invoice Reconciliation will be followed up by more examples of how blockchain services are being used in various industries to help solve real world problems. Be sure to read our recent article on Digital Ticketing and upcoming articles or schedule a free one-on-one consultation to find out how you can benefit from this solution.
Schedule your free one-on-one consultation with an IBM Blockchain expert today
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