Blockchain technology was first introduced as a way to secure digital cryptocurrencies, like Bitcoin. But now, nearly a decade later, companies are starting to see other possible applications, particularly in the accounting industry. 415 Group Supervisor Phillip Hann explains the potential impact.
I saw an article in Forbes that called blockchain ‘Wall Street’s most game-changing technology advance since the internet,’ and it’s true. Blockchain has so much potential for the accounting industry.
With this technology, there are no middlemen. No reconciliation. No corrupt date. No need for month-end cycles. No need to bring together all the different books and records of departments and counter-parties. That’s the promise of blockchain accounting.
It can provide a more transparent and durable framework for us to track and measure assets. It can also make it easier to understand what assets are available in real-time.
This increased transparency will be a good thing for clients and providers alike. The only people who are likely to lose out are the ones who are cutting corners and whose services aren't up to date. Those who are fully compliant and quick to adopt new technologies will come out on top.
Blockchain could allow for ‘smart contracts,’ which are essentially computer programs that execute under certain conditions. Think of an invoice paying for itself after delivered goods have been received. CFOs could benefit from these smart contracts, whenever they have repeating business deals and frequent transactions between multiple parties.
The challenge is this technology is in its infancy, so it’s at a relatively higher cost. But looking ahead, the accounting profession could look a lot different in five years. Some firms believe that blockchain could end up supplanting the modern double-entry accounting. While it could definitely be an industry disruptor, I believe there will always be a need for human accountants and auditors. But it’s exciting to see how this technology will advance our profession.
“Blockchain” may sound like something that goes on a vehicle’s tires in icy weather or that perhaps is part of that vehicle’s engine. Indeed it is a type of technology that may help drive business worldwide at some point soon — but digitally, not physically. No matter what your industry, now’s a good time to start learning about blockchain.
Blockchain is sometimes also called “distributed ledger technology.” It was introduced in 2009 to support digital “cryptocurrencies” such as bitcoin. Entries in each digital ledger are stored in blocks, with each block containing a timestamp and providing a link to the previous block.
Typically, a blockchain is managed on a secure peer-to-peer network with protocols for validating blocks. Once data is recorded, no one can change it without altering all other blocks — which requires approval by most network participants. Blockchain proponents argue that this process essentially authenticates all information entered.
The financial industry led the way in recognizing blockchain’s potential, foreseeing that users could execute transactions without relying on banks and other third parties. Another potential application is in the M&A sphere. Buyers and sellers could shift due diligence documentation to blockchain, so financial and legal advisors wouldn’t have to spend as much time poring over so many different and disparate records. The M&A process could thereby be completed more quickly.
There are also many industries that could employ blockchain technology to conduct quicker and more secure transactions or simply track data more efficiently.
Take manufacturers, as well as virtually any supply chain business: Blockchain could provide safeguards against errors, fraud or tampering. This functionality could bolster trust among supply chain partners. Over the long run, blockchain may even eliminate the need for third-party payment processors.
Another example: the health care industry. Blockchain could be used to better secure electronic health information, improve billing and claims processing, and enhance the integrity of the prescription drug supply chain. All of this could positively impact the health care insurance market for every employer.
Ahead of the curve
Most business owners don’t need to scramble to incorporate blockchain-related technology right this minute. But you might want to get ahead of the curve by learning more about it now and pondering some ways that blockchain could affect your company. Let us know if you need further information or other ideas on the future of business.