Anyone dealing with financial transactions will know that they all come with a degree of risk. Despite the most stringent security protocols, data can be compromised and the outcome can be serious for all parties involved in the transaction.
Blockchain is so named because it maintains a continuously growing list of ordered records, called blocks, on behalf of all involved parties. There is no longer any need for a separate privately managed database or shared ledger because all transactions are recorded simultaneously. Each block has a timestamp and a link to a previous block, and they are all linked together and encoded using cryptography which makes it ideal for combatting cyber-attacks. There is no central point of failure and a block cannot be altered or backdated.
The introduction of blockchain technology has caused ripples across many financial sectors, with concerns that the security inherent in its structure will reduce vital functions of the accountancy, auditing and credit management roles. It is true that it is likely to disrupt traditional accounting methods of invoicing, payment processing and contracts but this should be embraced, not rejected.
Accountancy is already undergoing a seismic shift as companies move their clients and their practices onto the cloud for the Making Tax Digital initiative. And, whilst in general, there is a more progressive attitude towards the benefits that technology can bring, established conventions are notoriously difficult to shift, and blockchain is being approached with caution.
The constant threat to both individuals and corporations from fraud and cybercrime is set to make the second half of this year a crucial point in the adoption of blockchain technology. They are looking for ways to eliminate the threat and regain control of their financial transactions, and accountants will be expected not just to assist and advise, but to lead the way.
According to a report from Deloitte, there are many benefits that can come from the influence of blockchain. They say that the standardisation of records would allow auditors to verify a large portion of the most important data behind financial statements automatically. This would reduce the cost and time to conduct an audit, and free up time to add more value in other areas. Another benefit is that it makes it possible to prove integrity of electronic files easily and it will support traceable audit trails.
If blockchain is to have an impact on existing accounting practices it might be a good time to consider diversification. Instead of focusing on compliance and regulations, many accountants could offer a more strategic financial advisory role that would assist clients in the development of their businesses, as well as their own personal finances. As part of this, they would need to communicate effectively and regularly, delivering real-time information about the financial landscape, highlighting any area of risk and details on the markets that their clients are working in.
Progress is inevitable, and blockchain digitalisation technology will be part of accounting practices moving forward. This won’t happen suddenly, but will instead be a gradual process in which collaboration will need to be facilitated by accounting and audit practices and technology providers so that digital and operational transformation can take place.
