Blockchain — the Future of Accounting
Hi Intrachain Community,
In this week’s post, we want to talk about the future of accounting.
As we all know, blockchain technology is revolutionizing entire industries. This is due to the fact that wherever data is stored, there is an opportunity for blockchain to take over. This is especially significant for industries where interoperable data is needed. We believe that through blockchain, especially the financial sector is about to undergo disruptive change. However and even though the blockchain technology has caught the attention of the largest financial authorities, it’s use cases still remain in a more experimental stage. In the following, we want to explain the benefits of blockchain in accounting across various industries.
As we have explained in earlier blog posts, the digitalization of accounting systems is still in a very premature phase compared to other industries that have already been disrupted by the advantages the technology brings along. This lack is rooted in the fact that the regulatory requirements are extremely high in regards to integrity and validity. To ensure that forgery is nearly impossible, mutual control mechanisms, checks and balances are required which inevitably has huge effects on daily business. These mechanisms include for instance systematic duplication of efforts as well as extensive documentations and periodical controls. All of these controls are manual, labor intensive tasks that are far away from being automated.
Consulting firms such as Deloitte forecast that the recently emerged blockchain which is a trustless, distributed ledger that is openly available and has negligible costs of use, is immensely promising for accounting use-cases. According to their research, in daily business this technology would for instance enhance the prevalent double entry bookkeeping. The aforementioned double entry system refers to the costly auditing system modern finical accounting is based on.
Against the background of this finding, we believe that the blockchain technology represents the next step for accounting. Companies can now write their transactions directly into a shared register, instead of keeping separate records based on receipts. This practice would then create an interlocking system of enduring accounting records. Due to the fact that all records are disrupted as well as cryptographically sealed, falsifying or destroying them is impossible.
How would companies benefit from forgery proof accounting records? We believe, they would benefit in many ways: firstly, it would allow auditors to verify a big amount of the most important data behind the financial statements automatically. Secondly, the time and cost revolving out of conducting an audit would decrease considerably. And finally, it would offer auditors the possibility to spend time on areas they can actually add more value.
In next week’s blog, we continue explaining the future of accouting and aim at answering the question whether accountants should be worried about the latest technological developments. Stay tuned!
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