Did you know that in 2018 the financial sector accounted for over 60% of the global market value of blockchain?
By 2023, worldwide spending on blockchain solutions is predicted to grow to around 15.9 billion. Across almost all industries, companies are scrambling to reap the benefits of distributed ledger technologies and the move to a financial system underpinned by blockchain offers a number of opportunities for the accountancy profession.
Typically, accountants are the experts when it comes to record-keeping, accurately navigating complex rules, business logic and regulatory standards. To improve efficiency, a surge in innovative technologies opens doors for accountants to develop powerful blockchain-led solutions.
Continue reading as we explore the blockchain effect on accounting, along with some of the essential blockchain skills needed for finance professionals to thrive in the future.
Technological innovation and digitalisation in accounting is a slow-burner. With extremely high data integrity standards and regulatory requirements, the finance sector often takes time to evolve and adapt. Despite the slow rate of change, the advances of blockchain technology have already begun to disrupt and penetrate the world of finance.
From simplifying complex regulatory requirements to automating lengthy manual processes and even enhancing the performance of bookkeepers, deploying blockchain solutions for accounting-specific use cases holds particular promise.
While blockchain technology has great potential, it’s still very much in an experimental phase for accounting firms.
Deloitte predicts blockchain technology is the next “big step” for accounting firms. That said, blockchain has many layers and knowing where to focus your attention and learning can be tricky. We’ve compiled a few of the essential skills to streamline the blockchain accounting training in your firm.
Knowledge of Business Drivers from Blockchain Implementation
Before diving into the technical blockchain development skills, accounting professionals should first understand the fundamental business drivers of implementing blockchain solutions. The benefits of adopting blockchain include:
- Increased efficiency
- Time, resource and cost reductions
- Fraud elimination
- Enhanced regulatory compliance
- A simpler process to manage dispute resolution between key stakeholders
- A reduction in financial and auditing errors
As a starting point, firms should treat blockchain less like another innovative technology trend and more as an effective avenue of investment. Having knowledge of the business outcomes that stem from blockchain implementation is guaranteed to help accounting professionals identify the ideal routes for improving operational efficiency and transparency.
Blockchain Architecture
Blockchain architecture is a fundamental concept that all professionals — accounting or not — should understand. While distributed ledgers form the DNA of all blockchain technologies, accountants may encounter distributed ledgers in a variety of contexts.
The three specific types of blockchain architecture, include:
- Private Blockchain Architectures are used when there are limited participants in a system. Private architecture is a popular choice among organisations that value a lack of decentralisation.
- Consortium Blockchain Architectures are most commonly used in a network where all members have total authority. Consortium architectures aren’t entirely centralised, making it suitable for use cases that involve groups comprising of multiple organisations.
- Public Blockchain Architectures feature the highest level of decentralisation of any blockchain architecture type. Public ledgers allow participation in the network by conducting secure transactions or data mining.
Cryptography
Cryptography is an integral element of the inner-workings of blockchain technology. Cryptographic puzzles are used to protect the identities of users in a network, deliver trustworthy and secure transactions, as well as protect valuable user data.
Behind the curtain of blockchain technology, cryptography can be credited as the tool that ensures all ‘on-chain’ information is accurate and secure. As such a fundamental part of blockchain technology, it’s crucial that accounting professionals are familiar with the mechanics associated with encryption and data privacy.
Smart Contracts
Smart contracts have been designed to help conduct transactions of goods, services and assets without the need for an intermediary or third party. These paper-free contracts are an accurate, transparent, secure and speedy way for accounting firms to exchange data and information effectively.
The efficiency of smart contracts is largely supported as a result of the decentralised nature of blockchain. Smart contracts are a formidable entry among top blockchain development skills for all forward-thinking accounting professionals.
At its core, blockchain technology is hugely compatible with accounting. Both blockchain and accounting share the common goal of ensuring validity when transferring the ownership of assets as well as maintaining an accurate ledger of financial information and data.
On top of that, professional accountants strive to measure, analyse and then effectively communicate financial information. Using blockchain provides accountants with clarity over ownership of assets, measuring rights, obligations over property, as well as an accurate map to plan how to allocate financial resources.
Blockchain technology enhances the role of accounting professionals by reducing the amount of time, resources and costs of maintaining traditional ledgers while simultaneously providing absolute certainty over the accuracy of customers’ financial data.
By eliminating the need to perform time-consuming record-keeping tasks, accountants have the freedom to focus on human-to-human, value-adding interactions. The blockchain effect on accounting culminates in a dramatic improvement of efficiency.
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Here at INAA, we connect accounting firms who aim to deliver quality professional services around a shared vision to make global business personal and take personal business global. Our collaborative association of international businesses is committed to being a part of the conversation around the blockchain effect on accounting and the future of finance.
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