Money

How do businesses process multi-million pound transactions?

In many ways, it stands to reasons that big businesses should be driven by big, multi-million pound transactions. You need only need to look at the technology sector to see evidence of this, with 2018 having already seen billions of pounds spent in the process of completing large-scale mergers and acquisitions.

If you delve beyond the headline numbers, however, you’ll also see a number of complex and multi-layered transactions that require considerable management. Companies that make regular multi-million pound transactions must also strive to track these payments efficiently, in order to manage their finances and maintain accurate accounts.

In this article, we’ll look at how businesses process multi-million pound transactions, while also asking what technologies are used to track these payments.

How do Firms Process Large-scale Transactions?

Once large-scale companies or commercial entities have agreed the terms of a particular deal, the interested parties usually involve third-parties in order to complete the financial transaction.

This is standard practice across all industries and private sector businesses, as it minimises the risk of fraud and creates genuine accountability for the management of finances.

It’s usually each party’s banking representative that gets involved directly with completing the transfer, in accordance with the formal requests made by the company’s involved. In some cases, firms may also use escrow services to complete longer and more complex transactions, as this provides an additional layer of security and helps to build trust between two commercial entities.

With escrow services, a trusted, verified and independent third-party is used to hold onto capital or assets while each businesses fulfils their agreed requirements. Once the precise conditions of the deal have been met, the escrow service provider will release the funds in full (or as agreed) and complete the transaction.

You may be familiar with escrow services if you’ve ever purchased a house, as your deposit and secured finances are held by a third-party until the time comes to complete the transaction.

In the case of the type of acquisitions and mergers we discussed earlier, the total value of the deal is rarely discussed in terms of cash alone. So rather than a single lump sum being transferred from one company account to another, acquisitions and mergers will involve different elements such as the transfer of property, shares and a variety of other valuable assets within a predetermined period of time.

What technologies are being used to track these transactions?

In terms of tracking high value payments, businesses are increasingly inclined to leverage blockchain technology in a bid to optimise efficiency. This is especially true for the type of blue-chip stocks backed heavily on Oanda, which often transact millions of pounds in revenue on a daily basis.

Brands such as Walt Disney have blazed a trail in this respect, having adopted the Dragonchain platform or use in all of its parks.

While some believe that this platform is used merely to accept cryptocurrency payments, it does far more than this. In fact, it also serves as a ‘crypto ledger framework protocol’, which actively tracks all transactions in real-time without the need for a central control point or authority.

This not only boosts the accuracy of financial reporting and accountability, but it also improves security and identifies potential avenues through which the brand can save some of its hard-earned capital.

The great thing about this technology is that it can handle any number of live micropayments, helping companies to process millions of pounds in transactions on an ongoing basis.

Photograph by Jarmoluk