By David Rose and Etienne Volschenk
Blockchain is set to be one of the most disruptive technologies to impact a variety of industries. One of these industries is accounting, with the introduction of blockchain the way that transactions are processed, retained and data audited will be vastly different. To understand these impacts we have to first examine the history of blockchain technology.
What is blockchain and where did it come from?
Blockchain technology was developed to aid in the operation of cryptocurrencies, most notably Bitcoin. It essentially is a new way of storing information online securely and with greater transparency. Most online information is currently stored on servers, including cloud technologies. Data using this model is only as secure as the server that it is located on as the entirety of data is placed in a single location. Data on servers are also not transparent as they can only be viewed by users that have access to the server. Blockchain technology utilises a different method of storing data, instead of storing the entire data set on a single server, data is fragmented into blocks stored over multiple servers using a peer-to-peer network. Each block of the data is verified and then assigned to a server where it will be stored. Blocks that relate to the same set of data is strung into a chain. Data is secure as multiple servers in multiple locations hold data and it is practically impossible to hack all the necessary servers to obtain the full set of data. Further, data contained in each block is inherently resistant to modification and can only be altered by accessing all data in the entire chain. The inability to access the entire chain by an unauthorised person creates a safe environment and leads to data being widely viewable, which in turn leads to greater transparency as data can be viewed but not altered by multiple users.
How does blockchain technology impact business?
Now that we better understand the history and application of blockchain technology we can begin to explore the impact on business. The implication of this technology may change the way that medical records are kept, votes are counted, identity documents are kept, payments and settlements for services and products are processed to name a few. It further has the capability to change the way that accounting data is recorded, viewed and used. Accounting data is currently either stored on private operating systems or on servers by utilising cloud technology subjecting it to the limitations of these methods that includes data security and transparency. These limitations are removed by storing data using blockchain technology. More secure data leads to fewer risks, and greater transparency will impact the way that accountants interact with accounting data. The audit industry is set to be impacted greatly by blockchain as more transparent data may require less audit procedures. In the future some of audit procedures may even be eliminated by blockchain technology. Another area that will be impacted is data recording tasks like bookkeeping and certain compliance tasks. Cloud technology is already disrupting these tasks and blockchain is set to further aid in the disruption by delivering a more secure and transparent platform.
What does all of this mean for the accounting industry?
Blockchain technology is not widely used for accounting functions yet and there are varying opinions on the impact that it will have. Some believe that it will hurt the industry as compliance service lines will reduce and as a result the need for services offered by accountants will diminish. We believe that blockchain technology is an opportunity for the accounting industry to evolve. Less time will be spent on compliance matters like bookkeeping leaving more time to interpret financial data and provide advice. In short blockchain technology will free us from time consuming compliance work and give us the opportunity to add more value to the businesses of our clients. Big organisations already partner with accountants in the capacity of business advisors as a separate function to accounting compliance, small to medium enterprise usually have fewer resources available and are not always able to split compliance and advisory services into separate functions. With the aid of technology the business advisory services available to big business is becoming more widely accessible by small to medium enterprise. Here at Vincents we pride ourselves on utilising the most current and up to date technology to add value to the businesses of our clients. We have adopted the use of cloud tools, implemented our client portal to simplify interactions with our clients and look forward to a future where blockchain technology will further aid us in adding value.
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