A blockchain is a continuously growing list of records (blocks) linked and secured using cryptography. They’re designed to resist fraud and provide a permanent record of any transaction indefinitely. Adding transactions to this block creates a chain, which is amendable, but the original input is permanent and not amendable. This eradicates the ability to conceal activity, therefore making entries true.
Blockchain’s effect will be far reaching. It will affect everything financial, from banking and investment to taxation commerce. But, how might it affect accountancy?
Because of the nature of blockchain, fraudulent activity can be prevented. As companies are able to share a transactional register, it becomes impossible to destroy or falsify the added data, due to the level of security blockchain has. It creates a database that’s distributed across the internet though is only accessible by those with heavily encrypted, highly secure logins.
Unprecedented amounts of data can be stored, so working on client accounts might well become easier than ever. Looking back to past performances will show you where clients have succeeded or not, therefore more data means reporting and forecasting has the potential to become more accurate.
You don’t need to become a computer engineer, nor need an in-depth knowledge of how blockchain works, but there are a few things to be aware of. You need to understand how blockchain will be adopted in the industry and, crucially, how it’ll impact your clients.
Workflows are likely to be revolutionised by the power of blockchain. This tech is unlike anything we’ve seen before, so the platforms used in practices will need to change. Deloitte write,
It may constitute a way to vastly automate accounting processes in compliance with the regulatory requirements. […] there are numerous starting points to leverage blockchain technology. A cascade of new applications will likely follow that are built on top of each other, leading way for new, unprecedented services.
Accountants will need to upskill to understand the features and functions of blockchain so client data becomes more precise and secure. There are some who think that blockchain will make regular practices in accountancy obsolete. For example, Gilad Amir of Lloyds Banking Group fintech department said in our Predictions for 2018 webinar, “Walking through the standard checklist auditors use, blockchain could eliminate 95 – 99% of things we do today.”
Blockchain has the potential to transform the way accountants practice. Combined with automation, we can see why and how core practices will become obsolete as they’re rolled out.
Intuit is harnessing blockchain to make their customer experience more streamlined, which can be employed by your firm too. To help their clients understand the need for this tech, they use a real-world example, writing on the QuickBooks blog:
Have you ever been in a situation where you want to sign up for something, but the application form asks for personal information you are not comfortable sharing? On a website, at an airport or in front of a bank counter, everyone wants us to prove that we are who we say we are. Intuit is applying blockchain to secure and verify one’s digital identity in a way that makes consumers feel confident and in control.
Blockchain is about the transfer of ownership assets and maintaining accurate information, so will have a significant impact on the accounting industry. ICAEW sum up the core benefit of blockchain in the accountancy industry in this article. As accountants and advisors, your main concern is to measure and communicate the implications of said data, therefore this technology will provide clarity over the ownership of assets, so increasing efficiency.
As we’ve seen with game-changers like the cloud, this will probably take a notable amount of time to get right.
This said, there’s huge scope for firms to up their revenue off the back of this development. If we think about how much automation is disrupting traditional services already, it makes sense that as we progress through the rise of this specific technology we will see more and more of this.
Accounting Today report that while there will be an amount of disruption, it “will certainly not eliminate the profession’s overall role or its importance.” The catch, they say, in this instance is that firms must adapt to this way of working. As blockchain is in its infancy, we won’t know for sure its full impact. But, if client services are impacted positively, imagine what could happen to your firm; processes are becoming ever-quicker, with far less input required, so it seems efficiency will reign. Saving all this time will leave you with much more scope to attract and win over new clients.
Not only finding use in accountancy, think about how it could revolutionise other areas of life. Accountancy Age makes an interesting point: “Imagine not having to trudge down to your local school in the rain to cast your vote, not to mention having complete confidence in a transparent democratic process free of possible fraud…” In this political climate, this advancement is something many of us would get behind.
Gary Turner, Co-Founder and Managing Director of Xero UK, said in Futrli’s Predictions for 2018 webinar that this kind of tech is solving a problem not yet recognised. He stated:
Someone comes up with an idea and it’s labelled as a solution for no problem, like blockchain. As we become more digitally aware, we’ll be able to harness it more effectively. Blockchain is future tech and we’re trying to work out what to do with it.
So, while it may be technology we’ve not yet harnessed, what pitfalls have become apparent so far?
There is some concern around the loss of jobs in the industry. But, this isn’t necessarily something to be worrying about. As tech develops, which we’ve seen time and time again, jobs shift.
It’s not about the loss of roles, but rather about adapting to what these roles become. It’s something to be excited about, as it’s an opportunity to learn and grow. The manual tasks that don’t require much skill to master will be forgotten in a few years, meaning more fulfilling practices take their place.
Making fraud a thing of the past, blockchain ensures that each entry of data on a chain remains true. A change to the way information is logged and stored lends space for new applications and platforms to be built and sent to market, which means jobs will shift, rather than disappear entirely. New services will crop up due to new demands, so it’s likely the industry will be unrecognisable, once blockchain dominates.