Understanding the future of blockchain as an accounting technology
August 8, 2019
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The accounting profession is changing, and it’s largely due to technology. Gone are the days of lonely accountants crouching over large, dusty ledgers, crunching numbers endlessly. Instead, people use accounting software and other innovative technologies like AI to keep on top of their finances.
And yet no accounting jobs are in danger: the world needs accountants now more than ever.
Companies that keep up with the latest accounting news know that the definition of accounting hasn’t changed. It’s the approach that needs a revamp. Today, it’s all about accounting management.
And there’s one technology that can help your accounting firm with that: blockchain.
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In plain English, this means that each transaction is recorded in a “block” of data that’s added to the “chain” of previous transactions. Since a copy of the ledger is stored on thousands of servers and the data is encrypted, tampering with it is nearly impossible.
While blockchain technology was initially created to facilitate cryptocurrency exchange, its current uses far outnumber the mere cryptocurrency market.
Accounting and blockchain – a match made in heaven
Accounting isn’t forgotten about. In fact, blockchain is the perfect technology for accounting and finance. There’s no other technology on Earth that aligns better with accounting principles than blockchain.
Because of the untamperable nature of the technology, it brings exactly that to the accounting equation what it needs the most: verification and reliability.
In the olden days, that happened through rigorous and never-ending checking and rechecking of numbers. But with blockchain, all that occurs automatically and within seconds, without you even lifting a finger. How?
According to “Blockchain Technology – A game changer in accounting?”, a whitepaper published by Deloitte, the basis of modern accounting is double-entry bookkeeping that was invented in 15th century Italy. However, despite the diligent double-entries, books still need to be verified and audited by third-party, independent auditors.
This is a lengthy procedure that significantly increases every business’ accounting costs. And it’s exactly here that the extreme transparency provided by blockchain technology can help you.
Audits could be performed much faster and at a much lower cost. Instead of manually checking the validity of each and every transaction, auditors could focus their attention on much higher level questions where the critical thinking of a human being is irreplaceable.
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Out with the boring, in with the added value
Who likes checking endless columns of numbers and comparing them to other endless columns of numbers? If accountants let blockchain technology take care of that part of the audit, a whole other world of possibilities opens up for them.
Uncovering and streamlining internal control mechanisms, for example, is a crucial task where specific accounting skills and knowledge are needed. Also, the classification of transactions and tracing the origins of cash in- and outflows need human brain cells with deep accountancy knowledge.
These are just a few tasks accountants and auditors will be able to direct their attention to, once blockchain takes care of the menial verification tasks traditionally associated with an audit.
The sky’s the limit
What else could blockchain do for the world, and more specifically for accounting? If you look at a random cryptocurrency news platform today, the answer could easily be “everything”. Yes, it’s true that people sometimes get overly enthusiastic about the potential of a new invention that later turns out to be not that game-changing after all. (Remember the Concorde airplane or the Segway?)
While still in its early stages, blockchain’s broad usage worldwide seems to validate the hype. Major companies, including the Big Four accountancy firms are already using the technology and are researching ways they could broaden their blockchain applications. And no, they don’t only need it to manage their cryptocurrency lists or check their cryptocurrency miners’ mining activities.
Wouldn’t it be life-changing to help shape the future of an industry? If your accounting firm hops on the blockchain train and helps develop new applications while strengthening existing ones, you can inscribe your name in the accountancy hall of fame. Not to mention the influx of clients and the industry-wide acclaim that come with it.
In addition, accountants may even consider contributing to develop blockchain applications for other industries, or helping shape the emerging legislation surrounding it. The specific mind-set and knowledge of accountants can be invaluable when it comes to uncovering the potential of this never-before seen technology.
Why not sign-up for the next blockchain brainstorming session in your area? Who knows, maybe you’ll end up inventing the next life-changing application like Uber or AirBnB.
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The power of blockchain, combined with current accounting software has far reaching implications for the whole industry. By redefining accounting, blockchain helps create a more streamlined, more robust industry that’s less focused on the routine tasks of crunching numbers.
With an increasing need for high-quality human added value and thinking power, blockchain may just be what makes the whole profession of accountancy more sought-after (cooler) than ever.