While the fervour for cryptocurrencies like Bitcoin has died down in 2019, the potential the underlying technology represents is still there. Blockchain, the technology that enables cryptocurrencies to exist, can benefit any sector that relies on financial information as it encrypts and secures it. Its unique way of preparing ledgers, an important part of accounting and bookkeeping, provides more transparency to ownership of assets and obligations.
This post discusses how accounting firms can benefit from the blockchain technology.
Blockchain: Does It Replace or Rebuild?
One of the major points to note when talking about blockchains is that the information once entered cannot be altered. It acts as the one singular place where all verified and recorded financial transactions are maintained. The fact that it cannot be altered enhances the credibility factor of the technology. For an external auditor, it becomes an easy way to double check and confirm the reliability of the books if is confirmed as accurate by a blockchain system.
Another important point is that blockchain solutions don’t replace the physical work of accountants or bookkeepers. It only makes manual tasks easier. The technology helps employees work better together and more error free. This is possible because of a joint register. Having a joint register means that the financial transactions to be recorded must be provided just once and the technology will itself create an interlocking system of accounting data records.
What Are the Advantages of Combining Blockchain and Accounting?
1. Reduction of the Cost: Blockchain technology doesn’t require a lot of infrastructure in terms of supporting tech or personnel to work properly. This allows an increase in efficiency levels while simultaneously decreasing the number of errors that can be made. This results in a complete cost reduction once implemented.
2. Time-Saving: Bookkeeping is currently a double entry process. This takes up a lot of time maintaining the books of a ledger. Through blockchains it becomes simple. Once any kind of financial data is fed in the system, the technology itself creates an interlocking system. Having an interlocking system means that one doesn’t need to feed the same data time after time.
3. Efficiency Level Improved: Blockchain is an all empowering algorithm. Once a blockchain is implemented in the system no other third-party software is needed.
4. Not a Centralized Database: Blockchains don’t run on centralized databases. Secured by cryptography, the technology allows people to have individual transactions as each has their own verified ID. In addition, access can be restricted to only users and the developers who are authorized can use the system creating a very secured database.
5. Reduction of the Possibility of Fraud: Remember, blockchain supported ledgers cannot be altered once fed into the system. Once one financial data is inserted, it is checked thoroughly before uploading. If there is any kind of changes that need to be made then it has to be done manually on all the copies where the ledger has been distributed.
Blockchains as a Part of Cloud Accounting
For blockchain to work, an accounting business or department would need to move towards cloud-based technology. They’d also need to recruit a blockchain developer to create custom user interfaces.
Like cloud computing, a blockchain doesn’t have any master server where all the inputs must be made. A new entry can be added from any node connected to the network. This makes the technology even more accessible and secure for the people using it.
Blockchain as a technology, is one of the most reliable sources of authentic data on the internet. In the coming years, it promises to become a lot more once it gets implemented into accounting systems. Since it’s still an evolving technology, future upgrades are expected to bring in improved and low-cost solutions.