How Blockchain Technology Will Revolutionise the Accounting Industry
When blockchain technology was first conceptualised, few could have predicted the impact it would have on every sector. What started out as a technology to enable the exchange and distribution of cryptocurrency has now expanded into one of the biggest inventions of the century. While it has applications in numerous industries, blockchain technology is almost tailor-made for the field of accounting. In fact, it could be the biggest factor to impact the accounting industry in years. But will this impact be disruptive or advantageous?
The link between blockchain technology and accounting
Blockchain technology includes several interoperable distributed ledgers, each connected through a ‘chain’. Because data isn’t stored in one centralised body, but instead is distributed, it is almost impossible to tamper with data stored on the blockchain. Any change that is made to one block is immediately recorded, offering a simple way to track, record and verify information. This simple principle has made blockchain technology highly valuable beyond just the world of cryptocurrency.
When applied to accounting, blockchain technology has immense practical uses. A significant portion of an accountant’s work involves maintaining and reconciling ledgers and ensuring the accuracy of data. But with the introduction of blockchain technology, accountants could find themselves spending much less time on these routine tasks. This technology can automatically track data and store it on ledgers. Accountants can gain a complete history of a certain transaction at a glance through the greater visibility and transparency provided by blockchain. Since it is virtually incorruptible, time spent on verifying data can also be eliminated.
Impact of blockchain technology on accounting
With the introduction of any new technology comes predictions and apprehensions about how it will impact life as we know it. Blockchain technology was no exception to this. Many have expressed reservations about blockchain, believing that it might make the work of accountants redundant. However, this couldn’t be further than the truth. While blockchain technology will certainly change the field of accounting, accountants should welcome rather than avoid it.
Blockchain technology can eliminate many lower-level accounting work related to transactions and recording of data. Since much of an average accountant’s workday goes into these tasks, the introduction of the technology can free up much of their time. This time can be spent on higher-value work like the actual interpretation of financial information and valuation of assets. Blockchain technology can also help accountants ensure greater accuracy when determining ownership of assets. The transparent nature of blockchains ensures that there is utmost clarity when determining ownership and transfer of assets.
Changing roles and responsibilities of accountants
Basic accounting work, while important, can also be very taxing and time-consuming. With so much of their workday going into this type of work, many accountants are unable to focus on higher value work. Blockchain technology, however, can streamline these tasks, reducing the amount of time required for them. With the extra time now available, accountants can instead increase client facetime, drive strategy and ultimately, grow their business. In this way, rather than being a threat, blockchain technology can actually aid accountants in expanding their practice and delivering greater value to their clients. Blockchain might be able to provide data, but it’s still an accountant who has to interpret it.
Eliminating the element of risk
With every step of a transaction being recorded on the blockchain, the use of this technology can go a long way in making the accounting industry more transparent. By maintaining records on a blockchain, it will become much easier for auditors to ensure compliance. Auditing can now be done in real time as the blockchain is constantly updated as new transactions take place. While on one hand, it means that auditors will have to rethink traditional auditing tools, on the other hand, it makes their work much faster and easier. Since auditors will be able to access information at any time, it will compel accountants to ensure there are no discrepancies in the records. As transactional-level verification will be much easier with blockchain technology, auditors can allocate more time to the contextual analysis of transactions. For example, apart from verifying that a payment took place between two parties, the auditor will now have more time to question the purpose of the payment in the first place. Migrating records to a blockchain can also increase a client’s trust in the firm as the technology provides greater security and transparency.
Taking on an active role
Far from being passive spectators in the blockchain revolution, accountants should play an active part in shaping the technology that will have such a huge impact on their field of work. Of course, this doesn’t mean that accountants should learn the complex codes that make blockchain technology possible. Instead, they can bring their expertise in the field of record-keeping and transaction processing to create customised accounting solutions facilitated through blockchain technology. Accountants can also play a larger role in standardising and regulating blockchain technology. Since the technology is still being developed, it is largely free from external regulation. When the issue of setting a legal framework for the technology arises, accountants can leverage their experience to suggest reasonable standard guidelines for the usage of blockchain.
Blockchain technology certainly has the potential to permanently transform the field of accounting. Because of this, it becomes imperative for accountants to familiarise themselves with the technology to gain a clear edge over their competition.
To learn more about Sundaram Business Services and how we can support your organisation, visit sundarambizserv.com