Invoice processing which may involve not only multi-organisations but a slew of their departments right from purchasing, accounts to others’ marketing, operations and more is not as easy as it might appear.
Even today, when numerous software solutions such as SAP electronic invoicing, enterprise resource planning (ERP), RPA (robotic process automation) and many other solutions are available and being used by companies across the world, according to various studies, 90% of invoice processing remains manual.
The scale of invoice processing could be understood by the fact that in 2019 alone, over 550 Bn invoices have been estimated to be generated. The average amount spent on every invoice varies from $11 – $15 per invoice. With so many invoices at play, that’s a huge expense for business as a whole as well as a time-consuming affair.
With automation changing business processes across the board, there have been similar solutions for invoice processing too, but their efficacy is questionable.
That’s what serial entrepreneur Vaideeswaran Sethuraman, founder & CEO of PARAM Network wants to change. PARAM’s blockchain solution claims to not only reduce the per invoice cost by $6 — roughly by half — but it would also automate the entire process while bringing in transparency. This also cuts down the turnaround time and complexity of the verification process in invoice processing.
Founded in 2017, PARAM Network’s blockchain tech which manages e-invoice processing and records digital receipts on-chain, is backed by renowned names in the industry like Sunil Rao, Nitin Sharma, Jaspreet Bindra, Richard Kim and Phil Windley.
Speaking to Inc42, Sethuraman stated that there is a slew of wrong practices in the existing system that must be corrected. And, that blockchain is the most viable means.
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Data Must Be Democratised
Talking about the status quo, where data mostly remains with the fiduciaries, Sethuraman who had set up Divum Corporate Services in 2008 and worked with the likes of Amazon, L&T, Microsoft and Google, explains that this is not the right approach. He gave us the example of regular Starbucks customers who visit the chain often. “Suppose you want to recollect the entire transactions that you have made at Starbucks. It’s your data. It’s your money that you have paid; yet, you can’t have it until and unless you have every slip of the payments made.”
Prima facie, this may not look crucial to customers, however, this knowledge is crucial for B2B businesses, where transaction records help companies raise loans, insurance etc from banks and other companies. It takes a lot of time and effort for businesses to recollect all the transaction records, and also for banks to verify those records.
Sethuraman further spoke about how Google and Facebook are making huge profits with this data. “However, as a user whose data is monetised, I don’t earn any money in return.”
He argued that users too should have access to their data and blockchain fills the gap.
“It’s the companies who’re having all the data. I don’t have ownership and access to my own data. Data has not been democratised.”
Trust Deficit Not Good For Business
Invoice processing involves multiple parties. There’s no automated authentication for checks and balances, said Sethuraman. “Most of the existing SAP, SaaS solutions are adopted for inter-departmental requirements. The invoice processing by most of these companies is done through emails and by scanning each and every invoice either manually or through RPA to fit their SaaS mechanism.”
Besides, it being a costly and time-consuming affair, the next question is, how can one trust these invoices that have come through several channels? He uses the example of a multi-party deal with levels of customers, and the big trust issue involved in payments and reimbursements.
“Since the payments you receive have limited information, it’s actually a cumbersome process further to find out who hasn’t made the payments. Which is a problem, if you raise ten invoices to different parties and you receive payments from only nine companies,” Sethuraman added.
‘Blockchain Is The Only Solution’
Blockchain comes to the rescue to solve the trust deficit in invoicing, as the original encapsulated block can never get deleted. It is the perfect fit multi-party collaboration, Sethuraman believes. PARAM records digital receipts on-chain, and construct knowledge graphs that would help further decentralise other applications.
According to Sethuraman, the transactions on PARAM are well-structured on-chain for querying for any kind of data. Every single node on the network has got two databases — a public database and a private database. The public database shares only a hash and it’s the private database which contains the invoice. The hash is circulated across the nodes for everyone to witness the transaction; however, the invoice transfer occurs only peer-to-peer. For the private database exchange, thus, a separate connection is created, based on the Secure Token Transfer Protocol (STTP).
“In case you are interested in raising loans from banks based on the transactions you did. You don’t need to provide all the documents, nor banks are required to spend a significant amount of time in its verification and validation, The entire record could easily be fetched from the public database such as whether the transactions occurred on the given date or not.”
Sethuraman contends that PARAM’s solution takes care of a range of transactions that happen pre and post-payment. Businesses and vendors can do transactions with many players simultaneously. The company has also created a free wallet for end consumers.
PARAM Network’s Blockchain Business Model
Set up in Q4 2017, it was only in Q1 2019 that PARAM launched a blockchain-based e-invoicing solution. “In Q2 and Q3 2019, we did a slew of pilot projects with MNCs and we are about to enter into a big contract with a global auto manufacturer and some other ecommerce players too. The commerce players we are in talks with raise a minimum of 10K to Lakhs of invoices per month. Our solution is instant and doesn’t cause any delay.”
PARAM charges businesses based on the number of invoices shared. The company is currently working with a slew of companies and sees a huge scope in B2B, B2G and G2B areas.
Just like in the case of Bitcoin and cryptocurrency startups in India, despite policies and efforts from states such as Telangana, Kerala to focus on blockchain-based solutions, there has been a slowdown in blockchain projects. Some of the biggest projects such as Bankchain, IndiaChain, have not turned out as announced. In this situation, can PARAM change the wave with its practical application of blockchain!
Why Use A Permissioned Public Blockchain?
Sethuraman calls PARAM a permissioned public blockchain. “We feel the world is not yet ready to adopt permissionless blockchain. For the public network, we have used Ethereum 2.0 while the private blockchain is based on Quorum.”
However, given the fact that blockchain startups and their projects have failed to achieve wide adoption in the Indian market, how prepared is PARAM in this regard?
Responding to the harsh reality of blockchain startups in India, Sethuraman uses the ‘internet’ analogy. “There is private and public blockchain. Recent B2B developments have been more around private blockchain. However, most of the single private blockchain applications are failing. It’s the public blockchain which has the real potential. This could also be understood by an analogy of the internet and intranet. The intranet has been there for a long time and is good for communication within companies, yet the real innovation has happened on the internet.”