How blockchain can help SMEs streamline operations

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Date: 30 November 2020

Business process management with workflow automation diagram and gears in virtual flowchart.

Do you own a small business or a start-up? Are you looking for ways to make your enterprise run more efficiently, transparently and with more security, all while cutting costs? If so, you should consider adopting blockchain technology. Blockchain began life in 2008 as the tech that provides the infrastructure for Bitcoin and other major cryptocurrencies. Since then it has evolved. It is revolutionising the way businesses, from start-ups to the largest corporations, actually do their business.

For the uninitiated, a blockchain is a shared digital ledger. The technology can be applied to everything from payments to contracts to supply chain management and so much more, all while greatly enhancing security and transparency.

Here we look at five ways blockchain could help transform your operation.

Supply chain management and proof of provenance

The majority of things we purchase are not the product of a single company. They will involve a chain of businesses. When you place an order with a supplier, you will know who you are buying your product or service from, but you might not know who has supplied your supplier!

This can create many issues, all of which directly affect your product and brand value. The list is long - parts arriving with missing or damaged components, delivery delays, incomplete or inaccurate paperwork, good old-fashioned human error and even fraudulent behaviour or theft. All these things can be out of your control and it can be a time-consuming and often costly process to identify where problems are coming from.

By using blockchain technology, your company will have a shared digital ledger with permanent and easily auditable records, which document every cog in the machine. You will have an audit trail starting with where each ingredient originated and documenting each transfer of hands. You'll know the exact state of the product at each stage and any issues can be speedily identified and corrected.

Payments and money transfers

Unsurprisingly, cryptocurrency is the best known blockchain application given its roots. This offers great benefits for the small business or start-up owner. Firstly, because you no longer need to reconcile documents such as invoices and billing statements, payments can be made almost instantly - be it suppliers, vendors, or employees, wherever they are in the world. Not only is it quicker, but it will save money too.

Using blockchain cuts out the middleman, freeing you from having to transfer funds through financial institutions and avoiding bank transaction fees which can soon mount up. As you will know, making a fairly basic bank transfer can see the application of numerous charges. These can include everything from origination and transfer fees to receiving fees. And, if you're transferring to another country, they'll probably take a percentage on any foreign exchange fees too. Of course, cutting out the middleman will speed things up too!

Smart contracts

Virtually all businesses need contracts at one stage or another. Creating them can be a time-consuming and pricey process. Although necessary, they can be a major burden. You need documentation, often extensive and written in complicated legalese. This means it's usually impossible to avoid the involvement of third parties such as lawyers. With the accompanying accounting and verification processes, this not only delays business from taking place, but legal fees can be expensive.

Blockchain tech allows for self-executing contracts, known as "smart contracts", to be created. These are automated contracts where the agreement between a buyer and a seller is written on blockchain in the form of codes. These allow two parties to enter into a binding agreement without the involvement of third parties such as lawyers. Everything is traceable, accountable, and secure, while new information or updates to the agreements can only be made with the consent of the parties involved. Everything is recorded in chronological order and time-stamped. The data structure is also append-only, meaning that once data is recorded, it is not possible to alter or delete anything, so fraudulent behaviour is eliminated. Blockchain can simplify, streamline, and speed contracts up, while cutting through expensive red tape and saving you money.

Better cloud storage

Over the past few years businesses have increasingly turned to cloud storage to store their data. While prices have generally come down over time, traditional cloud storage solutions such as Google and Amazon Web Services can still be very costly options. There are also security concerns – these platforms are usually highly centralised leaving them open to hackers – the infamous breach of Apple iCloud led to the private photos of Hollywood celebrities being leaked online.

Blockchain again rides to the rescue; small businesses and start-ups can use the system to store data far more cheaply than the centralised platforms, and the decentralised nature of the platform means would-be hackers have to break through all parts of the chain at the same time, which makes it exceptionally difficult for them to succeed.

Security

Not only is blockchain more hack-proof than other centralised data storage systems but there are other big security benefits too. The risk of fraud is reduced as transactions take place very close to real-time so any suspicious transactions can be swiftly identified almost as they happen or are attempted. The detailed (and time-stamped) recording of information also make detection after the fact far easier if anything is missed. Also, the cryptography of blockchain means users need not worry about sensitive financial or personal data being uncovered. For example, a company that needs to use credit cards can verify transactions without knowing the full personal and financial details of the client.

Final thoughts

Who would have thought back in 2008 that technology used to make cryptocurrency work and provide opportunities in fx trading would have so many brilliant applications for businesses. Blockchain is about so much more than Bitcoin and the benefits aren't reserved just for big organisations; new and small businesses can take advantage. Take a close look at how it could work for you – you could reap big rewards.

Copyright 2020. Featured post made possible by Muve Media & Marketing Ltd

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