When you come across the term ‘Blockchain’, graphs of different cryptocurrencies and NFTs with images may have popped into your head. Well, blockchain goes way beyond that and is slowly revolutionizing accounting and the larger financial environment. Blockchains refer to decentralized digital ledgers across a network of computers to validate transactions. While the technology was crafted for Bitcoins(the most popular cryptocurrency), it has been adopted in different industries, especially for banks and accounting firms. The digital lending industry may go through significant transformations with artificial intelligence and blockchain accounting.
Let’s check out how blockchain impacts accounting:
1. More transparent joint ledger
Blockchain in accounting makes ledgers more transparent. For instance, an organization that chooses to adopt blockchain in accounting, would have fewer internal discrepancies. Everyone from a rookie intern to a partner in the organization can access and update the ledger at any time from their device. This kind of distributed ledger system eliminates the need for a centralized database while ironing out the bureaucracy in your organization. Even if a device is offline, transactions can be recorded and updated later on.
2. Audits can be automated and traced
Auditing is big business and that’s why the Big Four have revenues comparable to large corporations. However, as blockchain gets wider adoption it has the potential to slowly automate this process. One of the greatest advantages of blockchain in accountingis smart contracts.
These contracts are programmable and can execute themselves based on certain triggers when the right conditions are met. With smart contracts, parties that transact frequently can reduce lag and errors while reducing intermediaries. The contracts automate auditing and make the process simpler and more traceable. The blockchain records everything in a chronological fashion and the trail is almost impossible to be tampered with.
3. Scalable solutions
Scaling up is nothing short of a challenge for most accounting firms. They conduct audits for several organizations and have comprehensive server farms or cloud servers with expensive subscriptions to do the heavy lifting. When the workload increases, the cost of upgrade rises significantly.
That’s where organizations can cash in on the benefits of blockchain in accounting. Instead of such expensive upgrades, businesses and large firms can configure blockchains to distribute workloads across a large network of devices in their own organization. Even when individual devices share a tiny fraction of their computing power, it accumulates to deliver unprecedented scalability.
4. Track assets seamlessly
Accounting and auditing go hand in hand. But things get very tricky when it comes to the verification of assets. Auditors need to spend significant resources during asset verification investigations. However, blockchains can simplify that process. With blockchains, businesses can represent their assets in digital form and record their ownership or transfer of ownership with higher authenticity. This simple innovation makes blockchain technology in accounting indispensable since it minimizes the risks of fraud and increases credibility.
5. Increased efficiency
According to PwC, blockchains are a great tool for cutting down costs on financial infrastructure and transaction costs. Blockchains allow for faster transactions with fewer intermediates and even fewer errors.
So, there you have it – blockchain isn’t just about flashy cryptocurrencies. It’s a game-changer in accounting with transparency, automation, scalability, seamless asset tracking, and increased efficiency. Embrace the revolution to stay ahead of the curve and simplify accounting for your firm. The enhanced security alone is incentive enough for most organizations to experiment with blockchains for their accounting practices.
Amilia Brown is a seasoned business writer & strategist who simplifies complex business concepts and turn them into engaging narratives. As a trusted business writer, she delivers actionable insights with precision.
