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It’s no secret that the rapid technological evolution of the 21st century has resulted in accountants everywhere racing to keep up with emerging, game-changing pieces of tech that are set to impact their profession! Blockchain technologies are the latest innovation to drastically redefine the role of accountants within an increasingly interconnected economy.
In this blog, we get up close and personal with blockchain and what it means for accounting in the age of automation and the internet of things.
By strict definition, a blockchain is a global digital ledger of economic transactions that is transparent, continually updated by countless users, and considered by many as almost impossible to corrupt or hack. The first blockchain was conceptualised in 2008 and implemented the following year as the accounting method for virtual currency, Bitcoin.
Tech-driven experts agree that blockchain – or distributed ledger - technology will enable accountants to make better-informed decisions based on secure and real-time updates from numerous users. While most people regard the internet as a public platform, blockchain protects transactions and increases security and privacy. In theory, it cannot be hacked because that would require overpowering all the computers that contribute to and update the ledger network.
Attracted by the idea of removing the middle man and moving towards decentralisation, many tech startups – such as Electron and Nuggets – are adopting blockchain technology with the goal of disrupting a variety of industries.
The digitisation of transactions will undoubtedly empower accountants to play a more proactive and business advisory role, both in partnership with clients and within multiple industries:
Rather than focus on the exchange and transmission of information, the internet of value centres on transactions. For example, if blockchain technology is implemented in accounts payable and receivable processes, with either intercompany transactions or client-customer transactions, it will verify the payment and the dates – leaving no room to doubt whether the buyer sent the payment. Because blockchain requires both the buyer and the seller to collaborate, it is essentially built on mutual trust.
The basis of blockchain is the encryption that secures transactions and records. To put it simply, every transaction that is conducted using blockchain technology is encrypted and the involved participants are identified by a string of characters. After a certain (and potentially varied) period of time has passed, all of these transactions become part of the block. After this block has been finalised, it is broadcast to all parties associated with that network, or chain. Should the block need to be altered at a future date, reviewers of the record will have the ability to identify when due to time stamp functionality. In changing how audits are performed, blockchain will also drastically reduce the amount of time needed to verify or confirm certain balances.
Because it pertains to accounts payable or accounts receivable, the potential for blockchain to be accurate from the onset is a relatively straight forward concept. For example, if the participants in a certain transaction are identified, the time and date of the transaction is verified, and the associated data is secured, then the risk of errors will significantly decrease. Through automating transposition corrections, verification of payments, and other lower-value activities, blockchain will ultimately enable accountants to add more value to both employers and clients in a quantifiable manner.
The significant increase in the speed of blockchain transactions will prove to be a valuable asset in the auditing process - which is traditionally performed based on historical rather than current data. Auditors will need to develop a more data-centric approach, using the power of real-time information to predict future outcomes.
Automating technologies hit hard, and they hit fast, which often results in the widespread misconception that various roles will be rendered obsolete. In order to benefit from the wave of innovation brought about by blockchain, accountants will need to cultivate and develop their skills in managing automated processes and making data-informed decisions.
As automated algorithmic processes increasingly dominate traditional audit and transaction services, accountants will need to pivot, adapt, and redefine their service offering in order to remain relevant. By doing away with auditing procedures and other grunt-work previously handled by accountants, blockchain will empower accountants to adopt a more proactive and human-focused approach.
Krish Jethani is a qualified Finance and Audit Recruitment Consultant at Search Consultancy in Manchester. He can be contacted at 0161 835 8625 or [email protected]
The world of Accountancy and Finance is changing, and the industry needs candidates who are tech-savvy, insightful and proactive! At Search, our team of specialist consultants recruit for a wide range of accountancy and finance roles throughout the country. To see our current vacancies, simply click the button below!