Blockchain technology has the potential to change the industry. It has aroused the curiosity of all walks of life, especially the financial industry. Blockchain is often referred to as "the future of financial services infrastructure". In the past few years, the financial industry has been dominating the headlines of media coverage of blockchain, and other industries have also begun to adopt blockchain technology to democratize the market.
For accountants, the use of blockchain can clarify the ownership and obligations of assets, and can also significantly improve efficiency.
Everything has to do with business automation. If there is a task that still needs to be done manually, it will waste the company's time. In order to achieve its daily goals, the industry still relies on mutual control, checks and balances and balancing mechanisms. This affects daily work efficiency. In addition to this, there are systematic repetitive work, a large number of documents, and regular control. Most of them are manual labor-intensive tasks and are far from automated tasks.
Modern financial accounting is based on the double-entry bookkeeping system. Double-entry bookkeeping solves the problem of managers knowing whether their account books are reliable. However, in order to gain the trust of the outside world, independent public audit institutions must verify the company's financial information. Every audit is a costly job, which will have a long-term binding force on the company’s accountants.
Blockchain has the potential to further improve the accounting industry by reducing the cost of maintaining and adjusting account books, and at the same time, it can provide absolute certainty of asset ownership and history.
When companies use the blockchain, they can directly write transaction records into the joint register (instead of keeping records separately based on transaction receipts), thereby creating a durable accounting record interlocking system. Since all entries are distributed and cryptographically encrypted, it is almost impossible to destroy or manipulate them to hide the corresponding records. This is exactly similar to a transaction verified by a notary-only electronically. This will allow accountants to verify large amounts of data in a short period of time, and the cost and time required to conduct an audit will also be greatly reduced.
Advantages of blockchain technology in the accounting industry
Blockchain technology has great advantages for both large and small companies. Here are some benefits:
Reduce errors: One of the biggest advantages of blockchain in accounting is its almost negligible errors. Once the data is in the chain, smart contracts will automate many accounting functions and reduce human error.
Improve efficiency: Blockchain is a fast and powerful database. The use of blockchain can realize the data entry and exit of the system more effectively than interacting with traditional accounting software applications.
Reduce costs: Blockchain will improve efficiency, reduce errors, and ultimately reduce costs. After the initial cost of adoption, accounting firms can expect to see cost savings faster than traditional accounting systems.
Reduce fraud: The immutable nature of blockchain makes it very difficult to implement and operate. In order to modify a record, you must make the same modification to all copies of the distributed ledger at the same time, which is almost infeasible.
Reduce time: A key feature of blockchain is that it can reduce audit time, which accountants should be excited about. Many audit functions can be automated with the use of smart contracts, which will reduce the time required for auditors to review records. The inherent traceability built into the blockchain will make auditing quick and easy.
Blockchain, as a source of trust, is also of great benefit to today's accounting industry. It can be gradually combined with traditional accounting procedures: from ensuring the integrity of records to a fully traceable audit trail. This will make fully automated audits a reality in the future.
Ernst & Young took the lead in accepting Bitcoin as a payment method. In April 2018, Ernst & Young launched the "Blockchain Analyzer", which will help Ernst & Young's audit team to review and analyze transactions on the blockchain. Its pilot will lay the foundation for automatic audit testing of blockchain assets, liabilities, equity and smart contracts.
KPMG launched the "Digital Ledger Services" program in 2016 to help financial services companies investigate the application of blockchain. The company also collaborated with Microsoft to create the "Blockchain Node" program, whose goal is to identify new applications and use cases for blockchain technology. KPMG is also a member of the Wall Street Blockchain Alliance.
PricewaterhouseCoopers (PwC) began accepting Bitcoin in December 2017. In April 2018, the company also announced that its first widely released blockchain audit service had signed up for the cryptocurrency business. The blockchain of service and audit companies will ensure that they use this technology correctly and effectively.
Deloitte (Deloitte) has been in the blockchain since 2014, when they launched a Rubix called the "blockchain one-stop software platform". Since then, they have continued to diversify their products and explore initial coin offerings (ICOs). Their cooperation with the Waves platform will make ICOs and cryptocurrency transactions easier than ever.
Two factors prevent the widespread use of blockchain in the accounting industry
It is true that blockchain technology offers a lot of hope, but it is not an easy job to integrate your business with blockchain.
If we prevent blockchain from entering the accounting industry from a non-technical point of view because of the lazy nature of this industry, then it will wait a long time before it can accept DLT technology. Of course, we cannot completely blame the accounting industry for all this, because the accounting industry's blockchain solutions for enterprises are not easy to obtain. But as innovators and investors enter this emerging market to meet demand, this excuse will soon disappear.
From a technical point of view, you will find that most of the current accounting software is not compatible with blockchain technology. Even if you want to put your accounting company on the blockchain, your current software version may not be blockchain friendly. The adoption of blockchain will require the purchase of cloud-based accounting services and the possibility of hiring a blockchain developer to create a customized user interface for your company. But as more and more accounting firms begin to adopt blockchain technology, many cost-effective solutions will appear in the near future.
How to prepare for the accounting professionAccountants are experts in record keeping, application of complex rules, business logic, and standard setting. Accountants can change the way blockchain is used in the future, as well as the way blockchain solutions and related services are developed.
It is almost unnecessary for us to confirm the accuracy of blockchain transactions and external resources, but there is still a lot of work to be done on how to record and confirm these transactions in the financial statements, and how to determine the judgment factors such as valuation. From a long-term perspective, more and more records can be transferred to the blockchain, and authorized audit and regulatory agencies will be able to check transactions in real time.
As more and more companies join the cryptocurrency economy, accounting firms that provide services for them will soon be forced to incorporate cryptocurrency transactions into their accounting processes. In addition, accountants who accept cryptocurrency payments will also be open to post-00s, and they will seek to cooperate with cryptocurrency-friendly companies. Some companies only accept Bitcoin as a means of payment, which is an opportunity for accountants proficient in blockchain technology to seize business opportunities.
As the development of blockchain continues to penetrate the accounting industry, regulators, technology suppliers, and accounting industry leaders must work together to find a transformation method that is beneficial to all parties. Accountants are not engineers. They may not know how blockchain works, but they need to know how to advise on blockchain adoption and consider the impact of blockchain on their business and customers.
in conclusionBlockchain is a new outlet in the accounting industry, but there are still a lot of things that need to be clarified, and there are still many things to be developed. The share of blockchain in this industry will only increase. Early birds catch worms. Although there are still many obstacles to the adoption of DLT, it is generally believed that it can completely change the core infrastructure system of the global accounting industry, thereby increasing transparency and efficiency. It will be very interesting to see how this industry develops in the near future.
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