Bitcoin has been hailed as an utterly transformative payment method, and today, experts are looking at this peer-to-peer exchange system to see how it can be applied in the world of procurement.
If you have not heard of bitcoin, it is a digital method of monetary exchange that derives from blockchain technology. However, bitcoin have real monetary value and can be exchanged for cash. Unfortunately, the currency has got a bad reputation lately, as it has been used to promote drug dealing and other crimes. This is because the sender and receiver remain anonymous in bitcoin transactions and do not come under scrutiny from the tax authorities or the law.
However, bitcoin is predominantly used for legitimate purchases, and in some countries, this digital currency has been accepted as legal tender. Since every bitcoin transaction is saved in a blockchain, it is extremely difficult to tamper with the digitally recorded information and details. This makes bitcoin a great option for procurement, where it can be used to pay for products and services and ensure transparency at every level of the supply chain process.
Questions related to bitcoin and procurement
Today, more retailers and enterprises are accepting bitcoin as payment for their services as the transaction fees are lower than what they would pay for in a credit card transaction. Naturally, this makes bitcoin attractive for procurement, as it helps to minimise costs. However, before an organisation uses this digital currency for procurement payments, there are several factors that they should ensure:
The supplier should be authorised to accept payment in bitcoin, as some it is considered an illegal form of tender in some countries.
Assuming that the organisation does not have bitcoin readily available, they would have to purchase them. Therefore, the organisation should look closely at the cost of buying bitcoin from exchanges that deal with this virtual currency.
What is the due date for the payment and will it be full or partial payment? This is important because the price of bitcoin can radically change on a daily basis, but in the long-run, it is expected that the value of this currency will increase.
Are the suppliers local or international? It can help an organisation save money when paying with bitcoin to international suppliers, as opposed to searching for the best exchange rates.
How will the organisation deal with refunds? What is the policy that the supplier has in place? Will the supplier refund in bitcoin or via a traditional bank transfer? How will that affecting accounting?
Once an organisation analyses these different scenarios, it can decide on whether it is feasible to use bitcoin for their procurement processes. However, there is no doubt that this digital currency has the potential to effect an enormous cost reduction in procurement, thereby adding value to any organisation.
Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.