Blockchain & The Future Of Accounting
The world of accounting is changing. And it’s all thanks to blockchain.
Yes, that’s right. The same technology that powers Bitcoin is now being used to revolutionise how businesses keep track of their finances, and accountants must adapt to reap the benefits of this innovative new technology.
What is blockchain?
To understand how blockchain is changing accounting, it is first necessary to understand what blockchain is. Blockchain is a decentralised database that allows for secure, transparent and tamper-proof record-keeping. This means that it can be used to store data such as financial transactions, contracts and other data in a way that is secure and cannot be altered.
One of the key features of blockchain is that it is distributed. This means there is no central point of control; instead, the data is stored across a network of computers. This makes it much more difficult for hackers.
Another critical feature of blockchain is that it is transparent. This means that all transactions on the blockchain are visible to everyone on the network. This makes tracking down fraud or other irregularities much easier, as everything is out in the open.
Blockchain is also tamper-proof. Once data has been recorded on the blockchain, it cannot be changed. This is because each transaction is linked to the one before it, forming a chain. To change a single transaction, one must shift every transaction after it, which is virtually impossible.
These features make blockchain an ideal solution for businesses that need to store data securely and transparently. For this reason, blockchain is often referred to as a “trustless” system.
So, what does this all mean for the future of accounting?
Now that we have a better understanding of blockchain let’s look at how it is changing the face of accounting. Only time will truly tell how this technology will impact the accounting field. However, it is clear that blockchain is set to revolutionise how businesses operate, and as more businesses adopt to this technology, the accounting industry will need to adapt as well.
One of the most significant changes that blockchain is bringing to accounting is in the area of record-keeping. As we mentioned before, blockchain allows for secure and transparent record-keeping. This is a significant advantage for businesses, as it means they can be sure that their records are accurate and cannot be altered. This is particularly important in the accounting world, where accuracy is of the utmost importance.
Blockchain technology eliminates the need to enter accounting information into multiple ledgers, saving businesses significant time and money and reducing the need for manual input and reconciliation. Blockchain-based accounting systems will allow businesses to keep track of their finances much more efficiently and securely.
Smart contracts and settlement of transactions
Another significant change that blockchain is bringing to accounting is in the area of smart contracts. A smart contract is a digital contract that is stored on a blockchain, and smart contracts are often used to exchange money, property, or other assets.
One of the benefits of using smart contracts is that they can help to speed up the settlement of transactions as they can automate verifying and enforcing a contract. This can save businesses time and money, as they no longer rely on third-party intermediaries to verify transactions. In terms of accounting, this can lead to a more efficient and accurate recording of transactions.
Impact on audits
There are some views that blockchain will eliminate the need for auditors. However, it is more likely that blockchain will change the auditor’s role. Rather than verifying transactions after the fact, auditors will be able to verify transactions in real-time. A transaction recorded on the blockchain is not the whole picture and does not necessarily mean it is correct. The auditor will still need to look at issues such as fraudulent transactions, related party transactions or classifications issues and other areas where judgement is required. The value in the blockchain is a record of the historical cost. However, financial statements may contain information about the current value or other estimates, which will still need to be looked at by auditors.
Blockchain is a revolutionary new technology that is changing the face of accounting. It is far from replacing accountants but stands to reduce the time spent verifying and recording transactions and the cost of these services. Businesses are also beginning to explore how blockchain’s transparency can help build trust with their customers. The potential benefits of blockchain for businesses are many and varied, and it will be interesting to see how this technology develops in the future.
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