It might still be early days, but blockchain is already making waves in the accounting and audit world. A completely new system, blockchain has the potential to supplant technology and processes which have been in place for almost 40 years in the finance industry. Businesses are already tentatively testing the waters!
The technology has opened up a brand new set of challenges and opportunities for professionals within accounting and audit roles, so we explore the technology, its capabilities and what the future might hold for the world of finance.
What is blockchain?
Blockchain is a digital events ledger which is securely distributed among a network of the event’s participants. You may know it as the technology behind Bitcoin, but blockchain has the potential to outshine the crypto-currency due to its wealth of additional applications.
Blockchain uses a majority consensus across multiple participants (whose identities are protected using cryptography) to validate transactions. It takes its name from the ‘blocks’ of data it stores; as new data is collected, a new block is made in the chain of historical information.
Transaction updates can only occur when a consensus of 51% is reached among the participants, which means that no third parties are needed. Because of the vast, decentralised network, data cannot be removed or edited and remains secure.
Blockchain has many other benefits and uses outside of cryptocurrencies, some of which may change the future of accounting and audit roles irrevocably.
A world of new opportunities
• More efficient asset/data transfers
When transfers are made via the blockchain network, they occur instantly. This has the potential to speed up world-wide payment networks and banking transactions by days or even weeks.
Furthermore, businesses can set up ‘smart contracts’—programmes which impartially and automatically record and complete contracts once a set of terms have been met.
• More comprehensive, accurate financial records
The auditing process could be streamlined by leveraging blockchain’s ability to accurately record and verify every aspect of every transaction in a synchronised ledger. This includes asset transfers and acquisitions, and inventory tracking.
Financial records will have far greater integrity because the margin for human error is eliminated. Auditing could even take place in real-time, thanks to audit trails which are instantly verifiable. Blockchain could also open up a host of new and exciting roles for future-thinking auditors, such as cyber auditing.
• Elimination of time-consuming tasks
Blockchain has the potential to free up finance and accounting professionals for more satisfying, value added work. It can be used to automatically order purchases or deal with contract completion.
This gives professionals more time to dedicate towards the strategic side of accounting, such as data interpretation or more advisory-based tasks which help businesses plan for the future.
• Greater financial privacy and security
Because blockchain networks are spread across potentially thousands of computers, the threat of hacking is reduced considerably. This also means that one compromised computer won’t affect the rest of the data held in the ledger and business consistency is maintained.
Internal audit teams will benefit from blockchain’s transaction log. It records all activity, including who performed it, so discrepancies are far easier to spot. It also reveals a wealth of information about transactions and users, which can help increase privacy further.
To hire professionals with blockchain experience or to find new roles involving blockchain technology, get in touch with the Robert Half team today.