Blockchain technology for accounting firms: The explosion of cryptocurrency propelled blockchain technology into the mainstream, and tech-savvy accountants were quick to recognize how it seamlessly integrates with their profession. The auditing world’s Big Four and other early adopters have started experimenting with blockchain way ahead of everybody else. What are the benefits of blockchain technology for accounting firms that are getting industry leaders excited?
Blockchain Technology For Accounting Firm Has Obvious Benefits, But First, Let’s Address The Elephant In The Room: Should Accountants Fear Blockchain?
Should accountants be afraid? As with any other new disruptive technology, accountants could fear that using blockchain in the audit and assurance industry is going to take their jobs away. Is blockchain technology for accounting firms going to replace human accounting professionals? The battle between man and machine continues.
If accountants in your firm are worried, assure them that if anything, blockchain technology creates opportunities. Embracing blockchain today will future-proof their careers as a blockchain-based future for accounting is becoming more apparent.
CPA.com’s President and CEO Erik Asgeirsson has these reassuring words to say:
It’s going to be a fantastic, secure database that will have uses. But it’s not going to put them out of work. Through every phase, what’s really happened is that the accountant’s and the auditor’s role has just evolved.
Once this fear has been addressed, you can start rallying your firm into adopting blockchain in your practice, starting with shining the spotlight on the following benefits of blockchain:
Blockchain Increases Efficiency
The double entry system on which modern financial accounting is based was invented during the Renaissance period. It solved the problem of business owners whether they could trust their own books by keeping separate records based on transaction receipts. These records are verified by external auditors, and despite the available accounting technologies, each audit is a costly exercise.
With blockchain technology for accounting firms, instead of keeping separate records, companies can write their transaction directly into a combined digital ledger, creating an interlocking system of lasting accounting records. All entries are distributed and cryptographically protected. It makes the entire accounting and auditing considerably more streamlined.
Blockchain Reduces Errors
This is especially true when it comes to accounts receivable and accounts payable. In every transaction, once the participants are identified, the date and time of the transaction are confirmed, and the associated data is encrypted, the possibility of errors decreases significantly.
If you’re looking for specifics, verification of payments, the number of transposition corrections, and other lower-value tasks can be automated using blockchain and ultimately, your accountants can focus on higher-value activities. Not to mention that error reduction at this scale will add value to your firm’s clients.
Blockchain Allows Your Firm To Fight Fraud And Cybersecurity Threats Authoritatively
According to the Association of Certified Fraud Examiners, “altering or deleting information in the companies’ accounting systems, changing electronic documents, and creating fraudulent electronic files” are the most prevalent methods to conceal fraudulent activities. These cost companies at least 5% of their annual revenue.
Blockchain provides a reliable solution. Blockchain creates an incorruptible and indestructible ledger, making it your firm’s first line of defense against fraud. According to Deloitte, this is similar to a “transaction being verified by a notary — only in an electronic way.” Blockchain also fortifies your firm’s cybersecurity against data breaches with the same safeguards against data theft and modification.
If you want to know more about cybersecurity, join us in our upcoming webinar on how to protect your accounting firm from cybersecurity threats. This webinar will primarily delve into ransomware prevention so if this is something you’re concerned within your firm, you’re more than welcome to join us in this conversation.
Blockchain Paves The Way For Real-Time & Automated Accounting
Owing to the fact that blockchain technology is a cloud-based and decentralized platform, it will help enable your firm to track the financial performance of your clients in real time. It will be easier than before to monitor the inflows and outflows from your clients. By leveraging on this feature of blockchain technology, you’re able to position your accounting firm as a trusted business advisor to your clients.
Further, with the use of smart contracts, many auditing functions can be automated which will minimize the time your auditors need to look after your client’s records. The intrinsic traceability built into blockchain technology makes auditing fast and easy.
The Benefits Of Blockchain Technology For Accounting Firms Outweigh The Initial Challenges
We do not expect all accounting firms to integrate blockchain technology in their practice, those who would are bound to get a competitive advantage over other firms.
So, what would be the main hurdles that would prevent accounting firms to invest in blockchain technology? We see two obstacles:
- The first one is the hesitation of the accounting industry in general to adopt digital ledger technology or DLT. There’s a “wait and see” period when accounting firms will allow early adopters to use a new technology first to identify all the possible cons. When they’re finally ready, the technology has already evolved, and the learning curve has become overwhelmingly steeper.
- The second reason is the most of the accounting software that are currently being used today are not compatible with blockchain technology. This means firms need to procure and manage cloud-based accounting tools.
For the first obstacle, it’s a matter of changing your mindset. Blockchain technology for accounting firms is here to stay, and we see no downside to adopting this new technology in your day to day operations.
For the second challenge, if your accounting firm doesn’t have the internal capacity to acquire, manage, and monitor the performance of this new technology, there are managed services providers whom you can partner with to help you build and maintain the necessary tech infrastructure.