blockchain Archives - RA Business Advisors

The buzz is continuing to grow across the business world for Blockchain, and we have written about it in the past, but how can accountants use Blockchain to streamline their work?

Wait, how does Blockchain work again?

Put simply, Blockchain removes the need for storing your own transaction records through creating an audit trail on “blocks”. These blocks are public and can be accessed/maintained by all parties involved in a transaction. The audit trail of a transaction builds as more information is added, blocks are encrypted to ensure privacy breaches don’t occur. Once a block is verified and added to the Blockchain. These can’t be manipulated by others but can be corrected by those involved.

Isn’t Blockchain only useful for cryptocurrency?

Cryptocurrency brought this technology into the zeitgeist, but these applications are just breadcrumbs of what Blockchain is capable of. The motivation for the use of this technology is secure and easy exchange of information between parties. These are very important capabilities when exchanging Cryptocurrency, but also useful for accounting and bookkeeping.

Why should I care about Blockchain?

Reports from the World Economic Forum suggest 10% of global GDP will be stored on this technology by 2025. Universities are offering courses in Blockchain, the next generation of accountants will be masters before they even enter the workforce. To put it simply, Blockchain is here to stay and is growing in importance.

How is this going to change accounting?

Because transaction information is entered into “blocks” and securely stored, there is no need for parties to keep their own records of transactions. However, there may become a triple-entry system, where transactions would be entered into both the Blockchain and each party’s ledgers.

Blockchain eliminates the need for auditors to verify transactions, this means accountants will no longer have to reconcile and process transactions as parties can record and share information independently. Standardisation also allows auditors to verify large portions of data automatically, saving time and costs for audits. This marks a shift in the workflow of accountants, through shortening the process of verifying information, this opens up other opportunities.

This technology can be used to improve the integrity of electronic files easily through generating a hash string of a file. Hash strings are electronic fingerprints of files which can be compared once timestamped into a file.

What changes are we seeing right now?

Robert Massey discussed the boom of Cryptocurrency business for accountants at the Accounting and Finance Show. As governments around the world develop better tax guidelines and recognition for Cryptocurrency, tax professionals will see more business.

Massey also discussed the idea of ‘smart contracts’ using Blockchain to embed contract details into third-party sources. For example, a contract where an invoice will pay for itself after checking delivered goods are received based on specifications and presence of funds in a company’s account. At the moment, ‘smart contract’ technology is being used in the legal industry, but the applications are wide spreading.

There is a lot of business in Blockchain, start to develop your knowledge now so you don’t get left behind

Blockchain – Painting The Picture

Have you ever thought about the ‘middlemen’ that are involved in your daily transactions? Think about when you buy a coffee from your local café – a bank confirms the amount you need to pay to purchase that coffee and then sends that amount to the café owner. Now let’s relate this to a larger scale business example – an auditor will examine a company’s financial records to ensure accuracy, and make sure that they comply with laws and regulations. Blockchain is an upcoming technology that might remove the need for these intermediary services.

The Blockchain offers the chance to bypass the middleman and provide secure verification for all sorts of transactions – saving time and money by eliminating the need for third party processes. John O’Connell of Macquarie Group has touted the Blockchain as “a layer of trust on top of the internet”. With this technology, there is the potential for vast improvements to transaction security and speed, market visibility, and elimination of fraudulent activity and disputes.

How Does It Work?

Blockchain technology is different to the classic accounting ledger – which typically records transactions in one place. The difference with the Blockchain is that it stores transaction information in several “blocks” creating an audit trail that builds as more information is added. Every party involved in the transaction is able to access the Blockchain, and are all responsible for maintaining it.

Implications

There have been concerns that the Blockchain could disrupt several industries; this technology could mean that there would not be any need for auditors to verify transactions conducted in the Blockchain. The presence of the Blockchain also eliminates the need for accountants to reconcile and process transactions, leaving companies, their clients, banks and tax authorities to record and share information independently.

However, several experts have assured that this technology will not displace the need of financial advisory – they instead see the Blockchain working synonymously with accountants. Claire Mackay, principle advisor at Quantum Financial has insisted that Blockchain technology will enable advisors to provide a faster and more efficient service, but the interpersonal relationship between the advisor and the client will still remain the key to business moving forward.

One thing is for sure, the Blockchain has the possibility of transforming accounting, audit and banking – creating one true record of transaction. Due to these changes, these services might have to re-evaluate the way they operate in the near future; ensuring that they still offer a value proposition that won’t be eclipsed by fast moving technological development.

Information gathered from intheblack.com

Post Contributor:
Andrés Pascoe

blockchain

How Can Accountants Use Blockchain To Step Up Their Game?