Headlines about blockchain have dominated the technology news cycles for over a year. But few tackle the most pressing question on the minds of accounting firm leaders today: “How will this impact the accounting industry?”
Blockchain – what research and advisory company Gartner defines as the ever-expanding list of cryptographically signed, irrevocable transactional records shared by all participants in a network – provides the basis of the popular cryptocurrency bitcoin. It also lays the groundwork for an innovative way to repeatedly update and verify records without the threat of corruption or security breach.
This technology is so promising that it’s drawing the interest of prominent financial services businesses, such as Citi, Bank of America, Morgan Stanley and more, and for good reason: the appeal of one shared, electronic, de-centralized ledger reduces or eliminates many of the redundancies and delays that dominate today’s financial systems.
How will accounting firms benefit from the increased transparency, accurate tracking and cost reduction that blockchain technology promises? Here’s a look at how technology companies will incorporate blockchain into the tools accountants rely on.
More companies will accept blockchain payment
B2C companies are increasingly experimenting with accepting payment via bitcoin, the blockchain cryptocurrency making headlines for the past two years, with big names like Overstock.com, Microsoft, Square and Shopify all accepting bitcoin payment. As B2B companies get on board with blockchain technology, accounting firms can expect to see accounting products and tools accept bitcoin payment, as well. To welcome the change, two of the ‘Big Four’ accounting firms – Ernst & Young and PricewaterhouseCoopers – already take bitcoin payment.
Tools built on blockchain will revolutionize accounting technology by removing the need for double entries
Deloitte notes that exceptionally high regulatory requirements have inhibited the technological advancement of accounting software because of the technology’s reliance on mutual control mechanisms for checks and balances. Acting as a decentralized, distributed ledger, blockchain could circumvent this “systemic duplication of efforts” and remove a significant amount of manual labor and intensive tasks from the process.
Improved transparency will lead to faster, cheaper settlements and transactions
Financial services transactions often require large amounts of time and money to process. Using “smart contracts” with blockchain technology could greatly reduce – or even automate – the work that goes into such settlements and allow accounting firms to work more quickly and with more accuracy. According to technology writer John Plansky, implications abound for banks able to settle trades in real time instead of waiting for the trade to clear or underwrite loans in a day instead of two weeks.
Accounting firms will be able to fight fraud authoritatively
The power of blockchain lies in its ability to reconcile accounts and track and measure assets. The result is an “indestructible and incorruptible ledger” that allows stakeholders to instantaneously verify the truth of any records from a client’s tax audit to business records. This will save your accounting team a lot of time and resources from manually digging through paper trails and other verification-based activities.
Companies with advanced blockchain teams will offer those services to others
Regardless of access to expertise, few companies will embrace blockchain with total confidence. Enter: PricewaterhouseCoopers new offering to audit blockchain implementation and ongoing transactions. More services like this will pop up and become increasingly niched, leaving small- and medium-sized businesses with the burden of vetting this expertise.
The novelty of blockchain technology means strategists and specialists are still considering how it might impact the way the world operates, today. From smartphone voting to replacing notary publics, there’s no telling how blockchain technology might change how we do business and how clients interact with accounting firms. Make sure you’re working with an informed security partner to ensure that your accounting firm stays on top of the most recent developments.