The accounting industry is currently experiencing an unprecedented period of innovation, as new technologies become more widespread within the sector. One of these new technologies is blockchain: which has the potential to radically transform the ways that accountants work.
In this article, we’ll delve into what the blockchain is and how it works, before turning to discuss how it can be used by accountants to enhance transparency, reduce fraud, and streamline processes. Finally, we’ll also discuss how INAA can help get your firm up to speed on this groundbreaking new tech. Read on to learn more.
What is Blockchain?
In layman’s terms, a blockchain is best described as a secure and linked network database used to store large collections of information.
Blockchain tech allows multiple participants and stakeholders to view, exchange, and store files and digital assets (known as ‘blocks’) simultaneously. To help users (or ‘nodes’) keep track of these assets, all interactions which occur within the blockchain are recorded in an account book called a ‘ledger.’
Whenever new data or digital assets are added to the blockchain network, the users/nodes are required to verify its legitimacy through a process known as ‘consensus mechanisms.’ Once the users reach a consensus on the relevancy of the asset in question, a new block will be created, attached to the ongoing chain of blocks, all of which will be recorded in the ledger.
The Value of Blockchain in Accounting
So, with all that said, what is the real value of blockchain for accountants in particular?
For starters, we can clearly see that the way in which blockchain stores information can be incredibly useful for the day-to-day bookkeeping that forms the bread and butter of any accountancy firm. The use of blockchain provides accountants and auditors with a panopticon by which they can view and determine the ownership and rights of assets stored in the chain with far greater certainty, and prove beyond all doubt when and how financial transactions have occurred.
A few other potential benefits of blockchain in accounting include:
- Transparency: The inherently transparent nature of blockchain tech ensures all stakeholders in an accounting firm have access to the same ledger, allowing them to monitor changes and updates to assets in real time. This, in turn, reduces the risk of potential fraud by having more eyes on the blockchain.
- Security: Security is a key feature of blockchain, thanks to a range of features such as encryption, digital signatures, and cryptographic keys making it extremely difficult for cybercriminals (or any unauthorized parties) to duplicate, forge, or change assets stored in the blockchain.
- Accuracy: Auditors can easily trace all transactions made using blockchain technology as and when they occur. These minute-by-minute updates, all of which are recorded for posterity in the ledger, can therefore make the business of accurate recordkeeping far easier.
- Efficiency: The automatic leger entries enabled by blockchain means that accountants and auditors can spend less time dealing with the minutiae of manual data entry. This means that these skilled workers can instead focus on higher order tasks, which boosts their overall operational efficiency as a result.
- Costs: Finally, all of the above advantages of blockchain add up to a measurable ROI for the enterprises that choose to adopt it. Not only that, but by cutting out the various middle-men traditionally involved in asset management and bookkeeping, and migrating this data to an in-house blockchain instead, accountancy firms can reduce their costly fees and expenses.
Learn More About the Future of Blockchain with INAA
As we can see, taking early advantage of blockchain technology is a vital objective for any firm in the accounting industry that wants to remain competitive and profitable in the sector.
However, embracing this tech depends upon a firm foundation of education and experience, not to mention networking with other industry professionals who understand the tech and the industry itself.
INAA’s goal is to support accountants looking to upgrade their tech stack through knowledge sharing, and professional development. With over 140 members across 50 countries, INAA enables accountants to connect with global experts, access cutting-edge tools, and stay ahead of industry trends.
So, if you’d like to learn more about how blockchain and other emergent tech can improve your business and working life, then consider joining our dynamic global network today.