There’s going to be a major technological change in the accounting industry soon. No doubt cloud-based technologies, artificial intelligence and process automation have influenced the world, but the most promising one is “blockchain.” If we combine blockchain and accounting, the combination of both can offer some far-fetched business benefits. However, the first question arises – what is blockchain?
- Blockchain is a continuously growing, decentralized public ledger of all transactions.
- Completed transactions/records are called blocks and are dispersed to a P2P network of computers.
- Blocks are linked to each other in a linear/sequential order.
- Each block comprises a cryptographic hash of the preceding block, which ensures that the data is secured.
- The data can be dispersed in a secure way and once the blocks gets recorded, they can’t be changed without shifting blocks subsequently, and that would require the involvement of the majority of the network.
- When a record is changed, it is allotted a new hash.
Blockchain and Accounting
Blockchain and accounting are related in many cases. Blockchain technology offers the subsequent logical step for more high-tech accounting with various potential influences.
- Blockchain offers an instant-verifiable and strong set of records that can’t be meddled or changed without the involvement of the whole network.
- Transactional data would be promptly recorded and added at any time to the blockchain through its own exclusive and unique hash code.
- If accountants/auditors want to recover that data, they will be required a pertinent hash code.
- Having blockchain work as a record for transactions will not require the accountants/auditors to interact different departments amidst businesses to get receipts in order to validate transactions.
Streamlined Accounting Strategies
- Accountants and auditors can standardize records through blockchain and combine them in a ledger, making it accessible to all verified and approved users.
- When all transactional data is gathered at one place and updated electronically – whenever an alteration is made, accountants and auditors can assess all the activity and can cooperate with the departments to settle accounts.
- Through such approach, the cost and time linked with manually swotting the transactions can be condensed significantly.
Promptly Verifiable Transactions
- For auditors, validating transactions and asset history is important, however, this process can take some time and can be complex, especially when businesses have diverse accounts.
- As data security is becoming more important, blockchain offers a means of demonstrating that files have remained inviolate.
- With a unique hash, auditors can simply “cross-reference” and can instantly validate transactions.
- If a record is changed later, a new hash is created and the record once again gets timestamped.
- If this information varies from what an auditor has there, they can be sure that the record has been altered, as they will have a clear review trail.
Better-Quality Acquiescence and Regulations
- If we talk about compliance, many companies take quite a few months to modify/update their core accounting and finance developments to put up new regulations, strategies, and standards.
- With blockchain, alters to the ledger are manifested across all copies within just a few
- As it’s a decentralized database, no radical changes should be made for the alteration of data.
- If an accountant wants to update a record, this can be done quite easily and quickly.
Future of Accountants and Auditors
- The major change – banks have begun to offer accounting type amenities as a chunk of business package.
- NatWest applied Open Banking protocols in 2017, to share information with FreeAgent, which is a cloud-based accounting product, providing consumers more discernibility over the course and letting them share their data directly amid the bank and accounting software.
- By adding blockchain and the accurate software to the combination, the record-holding procedure could be mechanized and, by means of open banking protocols, data could be directly shared.
Is there a need for an accountant?
- The future of accounting/auditing lies in combined-keys as they all can interconnect with each other instantaneously whilst distributing unparalleled sanctuary.
- Though many would see the technology as a risk, however, it’s a chance for auditors to concentrate on regulations and explore irregularities inside the transactional environment.
The blockchain is a chance to boost processes, however, auditors and accountants can apply their proficiency and vision to deliver value to the customers.