Accuracy in commercial transactions has always mattered but, until recently, has relied heavily on manual processes like human signatures on tickets, work orders and other hefty administrative tasks not inherently known for precision. Now Internet of Things (IoT) connectivity twinned with the ability to capture, measure and record previously unavailable data streams is pioneering a seismic shift in business, moving the very foundation of contract billing to real time, auditable, certain and accurate information.
Smart contracts offer a clear way to gain a competitive edge. By calculating accurate charges based on IoT field data and automating pre-reconciled, ERP-ready invoices, a new, transparent way to ensure transactional certainty and unparalleled efficiencies is finally here.
Smart Contracts Do More
When companies execute a smart contract, they agree up front on the services, pricing, triggers for billing, and the sources of data that will feed the triggers. A smart contract then automatically generates charges and invoices based on the data received in real time.
Consider it parallel to trusting the meter in a gas pump to be accurate when filling up your car. Why can’t that same logic apply to diesel as it is delivered to a construction site and metered into bulk tanks? In another scenario, if a managed pressure drilling systems’ density calculations are enough to drill an under balanced well, why can’t the mud provider receive payments for density delivered using those same measurements?
If companies can agree to trust the data they collect and use it to inform field operation payments, then the average 15-20 step invoicing process can be reduced to one or two steps in real time. Counterparties can also then agree to trust the data and smart contracts can collect, calculate and generate invoices without any additional human interaction or process steps. With this blockchain-powered smart contract technology, companies can standardize processes and interactions with vendors and customers alike.
A smart contract knows the formatting requirements of each counterparty system and can generate the required documents and data fields automatically. Each company need only to establish the digital identity of a legal entity once, then the system will automatically ensure that correct addresses, formats and structures are applied to billing documents.
Both sides of a contract further benefit from the radical transparency required by a smart contracting approach. As dumb scripts, smart contracts require business logic to be black and white and also mutually agreed upon. In most cases, data from both sides is required to fully automate the execution of a contract.
Resource and Time Saving Through Accuracy
What smart contracts offer is compelling: the saving of time, resources, people, contract leakage and financing costs. Now, and with escalating momentum into the future, companies will expand adoption of smart contracts to design, negotiate and execute all commercial transactions. After all automated contracts executed with certainty, speed and visibility are forging business processes centered on accuracy and once gained, signals a progress that’s here to stay.