As a proactive CFO or financial controller, you’ve likely kept an eye on how new technologies like blockchain can impact your business. After all, blockchain has the potential to revolutionize accounting and auditing. While it has existed as a rogue digital market for several years, government agencies are now attempting to regulate it. The processes associated with completing this could significantly impact your bottom line whether you adopt blockchain tech or not.
The Growth of Blockchain Cryptocurrency
Cryptocurrency has been in the news quite a bit over the past few years. Younger investors are often big advocates for this digital market, but what exactly is it? Cryptocurrency is a digital or virtual asset that uses cryptography to secure its transactions.
Blockchain Accounting
With the advent of blockchain technology, there’s been a lot of talk about how it will impact accounting. Blockchain is a distributed database that allows for secure, transparent, and tamper-proof transactions. These features could potentially have a considerable impact on the way businesses account for their finances.
In some ways, blockchain itself is a form of accounting technology. Some professionals refer to the system as a public accounting ledger. This stems from the fact that it facilitates the recording of assets and transferral of ownership. It even maintains a ledger to record proof of transactions.
Blockchain Ledgers
A blockchain ledger is a digital record of all the transactions that have taken place on a blockchain network. This ledger is distributed across all the nodes, or computers, on the network. As a result, everyone with access to that network has a copy of the ledger and can view it at any time.
The Impact of Blockchain Technology
Blockchain technology is still in its infancy, but it’s already impacting the accounting and auditing industry. One of the most significant changes stems from the way businesses can track their finances. Public records make it much easier for companies to keep track of their spending and ensure that their books are in order. It also makes this information accessible to other members of the organization.
Another significant change is the way businesses can interact with customers. With blockchain, companies can provide their customers with a more secure and transparent experience. Data security is critical in the age of data breaches and cybercrime, so crypto will likely receive a favorable response. However, this level of transparency might have some implications for data privacy.
The Future of Blockchain Technology
The future of blockchain technology is still very much up in the air. We may see widespread adoption of the technology in several different industries. It’s also possible that the technology will be limited to a niche market. Only time will tell how organizations will ultimately use it.
Currently, accounting professionals who previously dismissed this type of fintech are looking at it with renewed interest. Some companies are already revising business operations to accept Bitcoins and other digital currencies. These are some of the companies Forbes reported as accepting cryptocurrencies:
- Office Depot & Office Max
- Bed, Bath & Beyond
- Barnes & Noble
- Baskin Robbins
- Wholefoods
- Petco
Blockchain assets are often decentralized, so they’re not subject to government regulation. However, the Securities and Exchange Commission is taking serious steps to change this. It recently doubled the size of the staff handling crypto in anticipation of further regulations.
Blockchain Technology in Accounting and Auditing
As blockchain technology evolves, we’ll likely see more and more businesses adopt it. Growing use could have a significant impact on the accounting and auditing industry. While blockchain could create a more transparent approach to business finances, competitors could also access transactions that managers might otherwise prefer to keep secret.
On the other hand, blockchain could make it easier for businesses to comply with regulations. It’s also possible that blockchain will create new audit trails so that companies can detect and prevent fraud.
3 Skills Necessary for Success in a Blockchain Accounting World
Whether your business decides to adopt blockchain technology, expanded use could affect operations. Emporia State University identifies these as the top skills and traits you will need to navigate blockchain technology in accounting and auditing.
1. Agility
Accountants typically record, organize and confirm business transactions. However, blockchain automates this process. Consequently, accountants and other financial professionals would need to shift their focus to other aspects, such as how to determine valuations.
2. Willingness to Learn
Accountants will need to learn new skill sets to help them predict and account for the impact of blockchain technology. Learning new skills could also become crucial to maintaining relevancy. That could mean improving their knowledge of fintech and improving technical skills.
3. Consultation
As blockchain looms in the not-so-distant future, accountants must prepare to advise colleagues and business executives. The ability to do so could become an indispensable requirement for success in the financial world. This change will compel accountants to step away from the ledgers and move into an analytical and consulting role.
The Bottom Line
For now, blockchain technology is still in its early stages of development. However, as more businesses adopt blockchain, we’ll see more changes in how accounting works. Its use and popularity could also cause consumers to demand greater financial transparency, even for companies not usually required to disclose records publicly.
