Applying Block-chain based Smart Contract in Payment Management System - SERSC
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
International Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
Applying Block-chain based Smart Contract in Payment
Management System
Yohanes Chandra1, Reffiano Noeris Hiwa 2, Emil R. Kaburuan*3, Gunawan Wang4,
Sfenrianto5
Information Systems Management Department, BINUS Graduate Program –
Master of Information Systems Management, Bina Nusantara University, Jakarta
11480
1
Yohanes.chandra004@binus.ac.id, 2Reffiano.hiwa001@binus.ac.id,
3
emil.kaburuan@binus.edu,4Gwang@binus.edu; 5Sfenrianto@binus.edu;
Abstract
This Corona virus pandemic has made the economy in Indonesia decline, it is
estimated that by the end of the year the economy in Indonesia could return to normal.
Many employees are laid off amid this pandemic. This study takes the case of a company
that supplies goods that must survive amid this pandemic. Where companies must really
maintain their cash flow to survive, especially to run their operations and in the
procurement of goods for operational needs. The purpose of this proposed idea is about
the effectiveness and efficiency of payment administration, payment records, and payment
reminders in an organization. In other words, the ideas raised regarding the application
of smart contracts. The proposed block chain solution focuses on the payment
administration timeframe, the organization of payment records and payment reminders
between suppliers and buyers or trading companies.
Keywords— Block chain, Smart Contract, Terms of Payment, Payments Records,
Payment Reminder, Covid 19
1. Introduction
In April 29, 2020, as many as 9,771 cases have been confirmed as positive for COVID-
19. The number of fatalities is 784, while the number of patients who have recovered is
1,391 [1].
Finance Minister Sri Mulyani revealed the spread of the corona virus would further
burden the economy with a projected economic growth of Indonesia around 2.3 percent
due to the corona virus. However, the worst scenario of the RI economy is minus up to
0.4 percent [2].
According to M. Widyar Rahman, the economic recovery process due to COVID-19
requires a long time at least until the end of 2021 [3]. That way, if these conditions
continue to be sustainable, then it is very certain that Indonesia's economic growth will
decline, as evidenced the level of employees affected by layoffs increases amid this
corona pandemic and the number of employees who have been laid off has reached more
than 1.2 million so far due to the corona virus pandemic. That number is expected to
reach its peak in June 2020 [4]
The COVID-19 impact of changing the pattern of transactions in various companies in
Indonesia, where many companies are trying to survive in this pandemic, especially
companies engaged in the supplier sector. Where companies have to really maintain their
ISSN: 2005-4297 IJCA
1193
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
cash flow to survive, especially to run their operations and in the procurement of goods
for operational needs.
Cash flow management has long been recognized as a very important tool for the
survival of a company because cash is the most important resource for daily activities in
the company's organization [5].
Term of payment is quite common which is being used for cash flow management, the
contracts are used for set promises or rules between 2 organizations, with this payment
terms the company can survive from cash resources that cannot be predicted.
The payment term is a constraint and often fails in a project. In addition, they lack
transparency and authority. And also, the system relies on a trusted third party (TTP) for
payment. Thus, making them unreliable [6].
Terms of payment is one of the good solutions for purchasing goods but for producers
terms of payment is very important, especially in pandemic covid-19, Producer fear of
late payment is very large in this pandemic corona due to uncertain financial stability.
Therefore, this paper is primarily concerned with the propose idea about terms of
payment that is used in projects or supply items with involving two or more different
organizations, with a block chain based solution for term of payment, payment
monitoring and register term of payment which can help problems between buyers and
suppliers in the transaction process in the middle of COVID-19 outbreak.
2. Literature Review
2.1. Automation of Contract
Contract management automation has increased the company's demand for the best way
to evaluate available solutions, the company approached contract management operations
and deployed the best solutions, including contract modules from ERP, SRM and CRM
platform providers [7].
2.2. Smart Contract
In daily life, business activities carried out by someone not far from the contract.
When you want to buy and sell item, then there is a contract in it. When you want to buy
goods on an online site, offline sales or E-procurement, there is a contract that must be
agreed after. A contract that is often heard has the meaning of an agreement made
between two or more organization who agree on a matter and will create an obligation for
a particular things [8][9].
Some systems and standards for entering into contracts are well established and this
envisions the emergence of smart contracts idea, such as the example in electronic data
exchange (EDI) for communicating of structured data manner in terms of trading partners
[10].
3. Related Work
This project is a block chain – based solution for the POD (Proof Of Delivery) of assets
digital, they have a solution in changing the log evidence, tracking events and task that
occur using a unique token for each customer that accesses it, and automatic payment if
the project completely [11]
ISSN: 2005-4297 IJCA
1194
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
Figure 1. Interactions Between The Different Actors
They provide payments from digital assets such as digital books, photos, documents,
and streaming media by utilizing the security features of transparency technology on
block chains, block chain smart contracts that we propose by offering automatic
recording. organized and registered payments, payment records, payment reminders for
trading companies.
4. Purpose Idea
The goal of this idea is effective and efficiency terms of payment administration,
organization payment records and payment reminders, but it rather acknowledges
organization have power to overrule the smart contracts decisions. The Proposed Block
chain solutions focuses on terms of payment administration, organization payment records
and payment reminders between supplier and buyer or trading Company.
4.1. System Overview
The base design is that smart contracts reliably record Terms of payment processes and
can make suggestions on behalf of the supplier or buyer and connected with any ERP
system, ERP system can generate a data from the smart contract database in Ethereum,
and the data will be seen in the ERP system which will later facilitate and speed up
suppliers in administration in determining terms of payment for the buyer.
Figure 2. Smart Contract Application that combine with Block chain
In the picture above explains that the block chain server will store all data from the
ISSN: 2005-4297 IJCA
1195
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
terms of payment, payment records which will later trigger to remind the buyer or
supplier to make payment or billing to the buyer.
4.2. Smart Contract In Supply Chain Trading Company
Supply chain involves a series of steps involved to get a product or service to the
customers, the steps include request items to invoicing, the proposed smart contract in
supply chain trading company in Figure 3.
Figure 3. Propose idea in Supply Chain
We propose, smart contract between before sent quotation to buyer and payment. First,
the buyer must register and upload documents related to payment requirements such as
SIUP, TDP, NPWP, Company Deed, after registration is complete then the document will
be stored on the block chain and can be used by the trading company that will transact
with them, the smart contract will help the trading company to see the payment terms of
the buyer in the company that is connected to the smart contract, and can see the payment
terms of the buyer in other companies. The payment terms that are in the smart contract
have rules that will be clear right in figure 4.
Figure 4. Rules Terms Of Payment (TOP)
With the related rules then the trading company does not need to analyze the payment
capabilities of the buyer because their payments have been recorded in the block chain
that can be accessed by registered suppliers, suppliers only need to set the maximum
payment terms that they are able to provide to all buyers. Payment records have sufficient
rules that make suppliers trust smart contracts which are described in figure 5.
ISSN: 2005-4297 IJCA
1196
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
Figure 5. Rules Payment Record
This rule is arranged in such a way that suppliers feel safe in making transactions using
smart contracts where the penalty given if they are late paying they will go down one
level from the TOP (Terms Of Payment) before it, until the level of blacklist penalties in
all registered suppliers. But the buyer also gets a profit commensurate with the penalty,
the buyer does not need to request an increase in the TOP (Terms Of Payment) level to
the supplier, the buyer simply pays on time so the quality class of the payment from the
buyer will naturally increase following their payment accuracy.
The rules on payment records are also completed by the payment reminder system
where the running system will request daily data in the block chain server to get the
reminder data to be sent to the buyer, the submission for the reminder system will
describe in figure 6.
Figure 6. Rules Payment Reminder
In the picture above explains that the system will help remind buyers to pay with a
specified timeframe in accordance with existing rules, the rules can be set by the buyer in
accordance with their wishes. Payment terms will run if the supply chain process has
reached a Sales order, which if a sales order has been formed then the goods desired by
the buyer, can already be sent to the buyer.
Smart contract must also obtain quality control data from the two parties which if not
received from one of the quality controls, the system considers the item cannot be
processed into invoicing to the buyer. If all processes are going well, invoicing will be
generated automatically in the smart contract which will be sent directly to the reminder
and will be reminded in accordance with the rules explained above until payment is
completed, if payment has been completed then payment receipt from the buyer will be
sent to trading company which indicates that the supply chain process is complete.
4.3. Simulation Transaction with Smart Contract
ISSN: 2005-4297 IJCA
1197
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
In this study discusses the use of smart contracts to replace contracts that are usually,
especially during a pandemic corona, the economy is declining and inevitably the process
of buying and selling still must run. Not a few workers who work from home and some
even get laid off. This study takes the example of a smart contract simulation at an
urgency company during this pandemic, which is a supplier of goods for WFH purposes
such as supplier laptops, Wi-Fi, and suppliers of medical devices and anything.
With the existence of this pandemic, the transaction process that was previously carried
out as usual, meeting clients, vendors and making purchase documents manually, has now
become constrained.
Supplier have a concern about payment from buyer, and didn’t know predict their
payment in this pandemic, with this smart contract application, supplier got analysis from
smart contract based in block chain about buyer payment.
In the first buyer register in smart contract they get terms with cash before delivery,
after they got first transaction they get 15 days for terms of payment, they need to pay
with right time from the term in 3 times for get a better terms and supplier can setting
maximum term that they can provide.
If buyers can’t pay in the right time from terms, then they terms will drop with the rules
which are described in figure 5.
5. Discussion and Conclusion
Despite having a lot of potential, smart contracts are still classified as very young
technology. For example, the code that makes the contract must be perfect and not contain
bugs. This can cause errors and, sometimes, bugs like that are exploited by scammers. As
with DAO hacking, money put into smart accounts with errors in the code can be stolen
from it.
Moreover, the novelty of technology still brings many questions. How did the
government decide to arrange such a contract? How will they be taxed? What happens if
the contract cannot gain access to the subject of the agreement, or anything unexpected
happens to it? This happens when a traditional contract is made, it can be cancelled in
court, but Block chain makes the contract work no matter what, according to the 'Code is
the Law' policy.
However, most of these problems exist solely because of how smart contracts are still
young as a technology. With promises like that, technology will definitely be perfected
over time. No doubt, smart contracts will become an integral part of our society, because
smart contracts can make the world a better place that is free of commissions. Surely this
can reduce fraud, delays and overall costs for many things.
From the explanation of purpose idea above we can conclude that this will bring
differences on supply chain from trading company, such as:
1. Speed
Trading company doesn’t need to request the required documents for submission
of TOP, or analysis of buyer's payment capability, because all the data needed is
already recorded in the block chain of the smart contract.
2. Cost
Trading company does not require sending invoicing to buyers offline, because it
has been done by the system.
3. Security Discussion
Data manipulation only didn’t change the data ends up on the block chain. Each
party can delete or manipulate the data. The security of the data has proven the high
risk stemmed from different error from smart contract.
ISSN: 2005-4297 IJCA
1198
Copyright ⓒ 2020 SERSCInternational Journal of Control and Automation
Vol. 13, No.2, (2020), pp. 1193 - 1199
4. Secure
This application creates a sense of security in the transaction between suppliers
and buyers in which all buyer transactions are recorded in the block chain and can be
accessed by the supplier to ensure that the buyer does not have problems in payment
during the pandemic Covid–19.
5. Scalability
This application has rules that can be measured automatically which can reduce the
risk of transactions in this pandemic.
References
[1] “COVID-19 developments in Indonesia.” https://indonesien.ahk.de/en/infocenter/news/news-
details/covid-19-developments-in-indonesia (accessed Apr. 29, 2020).
[2] “Sri Mulyani: Dampak Virus Corona Berat ke Perekonomian.”
https://www.cnnindonesia.com/ekonomi/20200401111243-532-489012/sri-mulyani-dampak-virus-
corona-berat-ke-perekonomian (accessed Apr. 29, 2020).
[3] “Dampak Pandemi Covid-19, Ekonomi Indonesia Diperkirakan Pulih 2022 - Ekonomi Bisnis.com.”
https://ekonomi.bisnis.com/read/20200427/9/1233454/dampak-pandemi-covid-19-ekonomi-
indonesia-diperkirakan-pulih-2022 (accessed Apr. 30, 2020).
[4] “Virus corona: Gelombang PHK di tengah pandemi Covid-19 diperkirakan mencapai puncak bulan
Juni, Kartu Prakerja dianggap tak efektif - BBC News Indonesia.”
https://www.bbc.com/indonesia/indonesia-52218475 (accessed May 27, 2020).
[5] H. A. Odeyinka and A. Kaka, “An evaluation of contractors’ satisfaction with payment terms
influencing construction cash flow,” J. Financ. Manag. Prop. Constr., 2005, doi:
10.1108/13664380580001074.
[6] H. R. Hasan and K. Salah, “Blockchain-based solution for proof of delivery of physical assets,” in
Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and
Lecture Notes in Bioinformatics), 2018, doi: 10.1007/978-3-319-94478-4_10.
[7] A. Group, “The Contract Management Solution Selection Report,” no. June, 2005.
[8] F. C. Lunenburg, “The Law of Contracts : What Constitutes a Contract ?,” vol. 5, no. 1, pp. 1–5,
2011.
[9] Denny Tenggino, Richman Pakpahan, Wendy Widjaya, Emil R. Kaburuan, Gunawan Wang,
Sfenrianto, “Blockchain Smart Contract in Supply Chain Financing”, IJAST, vol. 29, no. 05, pp.
8630-8635, May 2020.
[10] G. Governatori, F. Idelberger, Z. Milosevic, R. Riveret, G. Sartor, and X. Xu, “On legal contracts,
imperative and declarative smart contracts, and blockchain systems,” Artif. Intell. Law, 2018, doi:
10.1007/s10506-018-9223-3.
[11] H. R. Hasan and K. Salah, “Proof of Delivery of Digital Assets Using Blockchain and Smart
Contracts,” IEEE Access, vol. 6, no. 8, pp. 65439–65448, 2018, doi:
10.1109/ACCESS.2018.2876971.
ISSN: 2005-4297 IJCA
1199
Copyright ⓒ 2020 SERSCYou can also read
