The Impacts of Blockchain on the Accounting Industry
Blockchain has found its way to virtually every industry—travel, insurance, education, banking, investing, government, real estate, and many others.
Companies all over the board are incorporating it into their business processes. While it has become famous for powering crypto, the tech itself has broader applications.
Since it offers us a new, incorruptible way to store, share, and record all sorts of data, are blockchain and accounting a match made in heaven?
Interested in reading more articles on blockchain use cases? Click here!
Claiming that blockchain is a piece of tech that is based on accountancy wouldn’t be a stretch. Blockchain provides a method for reconciling accounts and recording cash flow. It also records transactions and stores assets.
To meet regulatory requirements, the accounting industry has relied on paper trails to perform transactions and accounting functions.
Accountants have started to use cloud-based technology as well, but paper trails still dominate the world of accounting.
When reviewing “the books,” auditors need to see these paper trails. And, “cooking the books” is an age-old problem, so it may be time for a new solution.
Blockchain offers CPA firms and accountants an opportunity to streamline their audits and processes since it provides a transparent and immutable record of all data. It helps ensure that the data is truthful and accurate.
Blockchain can be leveraged to improve traditional accountancy and fight accounting fraud. It’s challenging to perpetrate fraud using blockchain due to its immutable nature.
Modifying a record on a blockchain is highly infeasible as the actor would have to make the same change on all the copies of the distributed ledger—simultaneously.
Many accountants are excited about blockchain simply because it can lead to much fewer audits in the future. Auditors can automate most auditing functions through the power of smart contracts.
Auditing can be fast and easy thanks to the inherent traceability of everything that is recorded on the blockchain. And, since everything is automated, blockchain can reduce the time an auditor needs to spend checking “the books.”
Improved Regulatory Compliance
Agencies must go through a lot to satisfy regulatory demands. Blockchain can help take the burden off thanks to the enhanced security it offers. Blockchain may even become mandatory in some inancial sectors as more regulatory authorities embrace the tech.
The end-of-month chores may become less of a burden. Accountants can start using smart contracts to automate reconciliation tasks.
Data entry is perhaps the area where blockchain can help the most. It’s where chances of human error are highest. Blockchain can significantly reduce human error by making most accounting functions automatic.
Blockchain can be designed to be much more efficient than legacy accounting software. It’s more challenging to get data into and out of accounting software. Blockchain is a much faster and more robust database.
No matter the system—a reduction in errors and an increase in efficiency results in reduced cost. When making the switch from conventional accounting systems to the blockchain, accounting firms can expect to see cost savings quite quickly. The initial adoption costs should be well worth it.
Will Accountants Lose Their Jobs?
Most people are concerned about their jobs whenever they hear news about a new, groundbreaking piece of tech in their industry. In some sectors, there has indeed been some cause for concern.
For instance, some investment brokers have been losing clients since individual consumers can now access the data they need to invest on their own.
But the responsibilities of accountants won’t change. Nevertheless, blockchain will still disrupt the industry. Accountancy firms and accountants will be able to provide their clients and their employers the security and safety of all records.
Auditors and everyone else who has to have access to those records (e.g., the SEC) will be able to access them. The need for accountants won’t disappear, even though their roles will change.
Before they enter the information into the blockchain, businesses will still need to hire good accountants to interpret and categorize that information. Accountants will be the ones to implement and maintain the new system. So, no, accountants won’t lose their jobs.
And, neither will bookkeepers. Nor most other employees in the industry for that matter. Someone will still need to oversee accounts receivable, prepare invoices, oversee contracts for payments, and track income and outflow.
Blockchain makes things better, but it still requires some work. Someone must enter payments, orders, and contracts into the blockchain. Blockchain will make the bookkeeper’s dream come true—it will provide transparency, efficiency, and record permanency.
“The Big Four” as Early Adopters
Because of its potential uses, the big four firms have started investigating the possible applications of blockchain in accountancy.
To help financial companies explore the potential of blockchain, the firm launched the “Digital Ledger Services” program back in 2016.
They are also a member of the Wall Street Blockchain Alliance. Moreover, KPMG has teamed up with Microsoft to identify new blockchain applications.
Ernst & Young
The firm launched the “Blockchain Analyzer” in April 2018 to help their auditors analyze and review blockchain applications. They were also the first to start accepting Bitcoin as payment.
The firm is one of the most active professional services enterprises in the world of blockchain technology, having started a dedicated program to train over 1,000 employees in the use of blockchain and cryptocurrency.
PwC has also announced a blockchain validation and auditing solution for cryptocurrency.
Deloitte was one of the first big brands to get on board with blockchain. Last year, they unveiled a mobile platform “Blockchain in a Box” to help businesses demo blockchain solutions.
The Bottom Line
Blockchain is here to stay. Applications of blockchain will only continue to increase. It will change the way accountants operate. Accounting won’t become irrelevant; it will become more efficient.
The same way computers and the internet have changed workplaces across all industries, blockchain will provide solutions to industry-wide issues. Businesses are currently re-evaluating their business models and assessing the need to implement a blockchain solution. However, it’s essential to keep in mind that problems should not be created to implement blockchain. On the contrary, a blockchain solution tackles pre-existing issues across a variety of sectors in different industries, proving to be extremely powerful in those cases. For sectors that have found a solution in other technologies, there may not be a need for the implementation of a DLT.