What does blockchain technology mean for accountants?
We are hearing a lot about blockchain technology at the moment, and its potential impact on the world of accounting and finance. Like all emerging developments, we need to understand how it's going to work and the effect it's going to have.
In simple terms, blockchain is a single ledger that records transactions between companies. Employees working in those companies are able to have access to the same information in the ledger in real time, if they have permission to do so.
Companies and their customers and suppliers can add data in the ledger and as such, an audit trail is built in "blocks", creating a chain once more than one block is added. Blocks cannot be edited or deleted and all the people involved in the chain can see them, without one specific person being responsible for controlling them.
In terms of accounting, this could be a complete game changer as it means that there is no need for each party to keep its own ledger. There would be one common ledger where maintenance is shared between a customer, supplier, tax authority, bank etc. This will obviously relieve the burden of processing transactions etc. from the accountant. And on top of that, the very nature of how the block chain is put together means there is less likelihood of both accounting errors and fraud, as when each block is added into the chain, the rest of the people involved have to verify it.
The issue of security has been a hot topic when it comes to blockchain. How safe and secure is it? In actual fact, to cause real disruption, someone would have to hack into the network of computers of all the organisations involved in the chain at about the same time, which is less likely to occur than a hacker getting into the computer network of a single organisation.
So, that is blockchain in a nutshell. It is still in its early stages, but it does have the potential to change the shape of the accounting and auditing world, and as a consequence, the role of the accountant in the future.