From Shipping To Accounting Blockchain Does It

Say the word. Blockchain! Suddenly you’re surrounded by several new people you’ve never met and never knew were going to impact your future in ways you hadn’t previously imagined. Blockchain something many connect with cryptocurrencies such as Bitcoin is about to go mainstream and that’s why we’re taking a look at its uses in my new series “Blockchain Opportunities And Risks For Finance”. Mind you this is not one of these how does it work in theory kind of article series but rather it’s a practical view on how it’s applied in real life. That’s why I’m asking these new people what it is they do with Blockchain and how they think it’s going to affect Finance in the future.

To kick-off the interview series it’s my pleasure to introduce Jody Cleworth who’s the Founder of MTI (Marine Transport International). At MTI, they focus on Digital Supply Chain Engineering and aim to:

“…significantly reduce additional cost associated with general freight forwarders and provide fair, market-related prices, giving the customers control of rates, operations, and documentation at the click of a button. Their model is 100% transparent to the end user and their team of experts is always on hand to help with any logistical or technical questions.”

For this purpose, they use Blockchain technology in their SOLASVGM? solution to help shippers provide information about the verified gross mass of their containers instantly to all related parties. Their purpose goes further though to replace the current transportation documentation process in shipping i.e. Bill of Lading, Letters of Credit etc. By utilizing Blockchain technology all this can be automated and information exchange between related parties be synchronized.

That sounds awesome so why do we not see Blockchain applied everywhere?

It easy to see the massive potential of Blockchain when applied to the shipping industry so why is not just happening at large everywhere and what would it take?

Jody explains: “ Education. The general population needs an open debate about what the technology is being used for. Many different applications exist. While cryptocurrencies might be prevalent in popular media, it is not the only use case [as MTI has demonstrated].”

Ok, so maybe this is too technical and fluffy for the general population but senior management and board members in corporates should be able to see the clear benefits, right?

“Senior management is generally curious, but remain a bit reluctant to invest immediately. The industry is asking for finished products, but we cannot skip the step of doing proof of concepts. Education is decreasing as organization move from Phase 0 to building pilots.” Jody says.

So how about if we ask at the operational and commercial level? They must be able to understand the potential, no?

Not necessarily Jody says: “It’s definitely a mixed bag across all organizations. Operational people understand the type of cost savings which are involved. Commercial people, the ones who could potentially make the most impact from the technology don’t have the IT understanding to push the adoption.”

It's clear that while the technology is understood by innovators and early adopters the commercial/use potential still has some way to go before it’s understood by an early majority of businesses. In this case, no one would expect the finance function to be at the forefront of this development.

The impact on Finance could be massive

Just because the finance functions around the companies are not on top of their Blockchain game yet it doesn’t mean it’s too late as no one else really is now. So, I also asked Jody about how he sees the impact on Finance. The first word he mentioned was “Smart Contracts” and it’s easy to understand why.

Jody explains. “Smart Contracts enable automatic release of funds upon completion of a specified milestone, i.e. when party A attests reception of the goods, send money to party B. This could potentially reduce the need for debt collection, removing the need for Accounts Receivables and Payables functions.”

BOOM Blockchain just removed the need for AR/AP functions because it’s all automated and auto executed in one go. What’s not to like about that? Furthermore, as all information in a Blockchain network adds up to one shared version of the truth it reduces the need for controlling, reconciliations etc. BOOM there goes another chunk of your finance department. The great outcome will be better data quality meaning we can trust the result of our analysis. Wouldn’t that be nice for a change? For some, all of this can be quite scary though as they’re seeing their jobs disappear. However, fear not.

Jody says: “Finance functions must understand that reducing redundant tasks does not entail loss of jobs. Instead, it paves the way for improved quality of analytics and forecasting, which can allow finance employees to find more value in the job they perform. Instead of doing manual repetitive tasks, they will move towards spending more time on critical thinking and scenario simulations.”. This is the movement that we’ve been trying to make for many years anyway and along comes Blockchain acting as a huge enabler. You just need to grab hold it and start pushing adoption within your company.

But wait there’s more!

Does the phrase “Open Accounting” mean anything to you? I tried Googling it when Jody mentioned it but didn’t really find anything of interest. So, I was curious to learn more about how Blockchain can move us into an Open Accounting world. In this case, all your transactions would be on the Blockchain network yet it would be encrypted so your competitors or other non-related parties would not be able to get access to it.

Jody tries to explain the concept: “ Everything is encrypted to start with. You and I have token and so does amazon. You want to buy a pen from me and I can source it from Amazon, I tell you that I can source the pen, however, you know nothing of where I am sourcing that pen from or how I am going to deliver it to you. All you know is how much I am going to charge you for it. There are 3 parties involved, I can keep the delivery details and sourcing a secret as I don't share the data with you based on the smart contract however I invoice you as per the smart contract which I use to execute the agreement. This way it protects all commercial knowledge, however, we can still keep everyone at arm’s length”

That means by leveraging all the possibilities of Blockchain technology there’s no need for accounting anymore and you can start your finance function at the analytics stage. Now we just need to figure out exactly how to get there but I’m keen on exploring this further and hope that you are too! Stay tuned for coming interviews in the Blockchain series and several articles discussing specific features of Blockchain and how we get to implement it.

Let me know what you think of the article by liking, commenting or sharing! Blockchain is such an exciting topic hence if you have any experience with it I would love to know. Otherwise, follow my Blockchain series here on LinkedIn or on Twitter. You can also dig into some previous series about what's happening in the finance function and not least “Introducing The Finance Transformation Nine Box” which is really the starting point for the transformation. Finally, you should join the Finance Business Partner Forum where we will continue to discuss this topic.

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Anders Liu-Lindberg is the Head of Global Finance PMO for Maersk Transport & Logistics and is working with the transformation of Finance and business daily. I have participated in several transformation processes such as a (business) finance transformation at Maersk Line, going Beyond Budgeting at Maersk Drilling and transformed a finance team from Bean-counters to Business Partners. I would love the chance to collaborate with you on your own transformation processes to help you stay out of disruption. Don’t be shy! Let’s get in touch and start helping each other.