What Should Accountants Know About Blockchain?
Blockchain. It is a digital innovation making waves across a wide variety of industries. In accounting, this data systems technology can mean automation and security never before possible.
But what does this mean for accountants themselves? Is blockchain likely to impact the industry or jobs within it?
Accountants should keep in mind a few important details surrounding the use of blockchain in their sector of the economy. Here’s what you should know.
What is Blockchain?
Blockchain is a system of data storage and transfer created for and popularized by the cryptocurrency Bitcoin. Nowadays, blockchain systems range much further than cryptocurrencies alone. With potential in a myriad of industries, blockchain has expanded into virtually every sector of the economy.
These decentralized databases of near-immutable data stored over linked cryptographic hashes are famous for their security and accessibility over global networks. For accountants, this means safe data with a reduced risk for both human error and intentional tampering. It means greater accountability and automation potential for a host of accounting processes.
The combination of artificial intelligence processes alongside blockchain has further powered this potential. Form predictive modeling to enhanced security, accountants now have the tools to streamline their jobs. This makes for unprecedented opportunities if applied effectively.
How is Blockchain Used in Accounting?
There are many ways accountants are applying blockchain to good use. Blockchain has revolutionized the way records are stored and verified, accounts are settled, and security is provided to vulnerable financial data. All these processes make for a streamlined accounting experience.
In the following three areas, blockchain advancements are truly transforming the accounting industry. Here’s what you should know:
- Triple-Entry Accounting
While double-entry accounting has been a common practice in accounting for some time, triple-entry accounting is made possible by blockchain technology. Because these databases are decentralized, a transaction can be sent to three different nodes or blockchains at once. This transaction then becomes permanent and immutable and can be easily verified through automated auditing.
- Real-Time Settlement
A common problem in the world of digital payments is the transition of funds from a credited account, resulting in a non-payment. Blockchain has the potential to settle these accounts almost instantly before any errors or fraud have a chance to enter the system.
- Security Building
Enhancing the security of any data systems is a must amidst the current pandemic of cybercrime. An emerging blockchain trend is to offer this added security through blockchain-based decentralized data services. For accountants, this means accounts that are kept private, backed-up, and protected from all but the most aggressive cyberattacks.
While these offerings may not seem like much at first, the impacts can mean a lot for accountants. Automation of lengthy auditing and settlement processes could allow accountants to focus on securing and cultivating business assets in the time saved. Businesses could experience much greater efficiency as a result.
But how would this level of automation affect the accounting industry?
What are the Impacts of Blockchain on the Industry?
While it is impossible to predict the full effect that widespread blockchain adoption might have on accounting as a profession, the field will undoubtedly continue operating with similar employment levels. Automation and shifting roles will affect the industry, but the need for professional auditors and accountants will always be around.
The impacts of blockchain on the accounting industry will likely be far more positive than anything else. Blockchain isn’t a miracle tool; it will require experts’ oversight to continue managing accounts effectively. Rather than eliminate jobs, blockchain will offer clarity of data, simplicity of the process, and permanency of records.
Accountants’ roles and responsibilities may change with the streamlined system, but this also creates opportunities for talent development and the compensation that comes with it. You can build this track into your plans via HR and studying and maximizing the potential of blockchain systems could be invaluable for training accountants in the future. Doing so will undoubtedly lead to higher salaries due to the technical nature of blockchain expertise.
But blockchain adoption in accounting is still in the early stages. It is difficult to say precisely how blockchain will transform the accounting field in the years and decades to come. There may be a few key predictors, however.
What Could the Future Hold?
The future of blockchain in accounting depends on how it performs at its current rate of institutional adoption.
A few big names have already adopted blockchain systems. Ernst & Young, for example, launched an analyzer program to assist auditors in reviewing blockchain systems. Others are experimenting with digital ledgers or demoing blockchain solutions to businesses. The success of these blockchain innovations for early adopters will determine how quickly other industries pick up these tools.
Additionally, blockchain success is linked to the cryptocurrency markets they have historically operated within; however, the technology has been making a name for itself on its own. One could argue that if cryptocurrency continues to stay on its upward trend, it could quicken the widespread adoption of blockchain in the accounting sector.
Those in the accounting industry won’t need to fear, however. The integration of these systems will more than likely not cost your jobs. Instead, shifting roles could make it beneficial for you to become familiar with these systems now before seeking formal training. Learn the ways blockchain can serve you and prepare for a future of seamless accounting processes.