As 2018 is wrapping up, the race for the topic of the year in the accounting profession has long since been decided. Blockchain has been the concept on everyone’s lips, and it’s only going to become more omnipresent in the coming months and years. “It’s not coming; it’s already here,” AccountingSuite COO Kurt Kunselman told the Digital CPA.com podcast recently of blockchain technology in accounting. If you want to be at the forefront of leveraging this disruptive, innovative technology, you need to familiarize yourself with the basics now.
What is blockchain?
When it comes to blockchain, Kunselman noted, “the biggest problem is the understanding.” This lack of clarity surrounding what precisely a blockchain is and the ability of people to talk around it without ever providing a clear definition is all the more maddening because it’s a relatively straightforward concept, one that most accounting professionals can quickly grasp.
So, before we go any further, let’s get a clear description on the table. The most commonly accepted definition of blockchain comes from the Harvard Business Review, which describes it as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
“Open” and “distributed” means that the data stored on a blockchain is housed across a vast decentralized network, rather than solely in a handful of places. Think of a car purchase that happens between two private parties. In a traditional ledger, that transaction is recorded in two or three places at the most. In a blockchain-based ledger, that same transaction could be recorded in millions of locations, making it nearly impossible to falsify or dispute. This, in essence, is the promise of blockchain. Understanding the blockchain as such makes it easy to recognize why it’s the technology at the heart of cryptocurrencies like Bitcoin and Ethereum.
How will blockchain affect accounting?
In essence, Kunselman said to CPA.com, an accounting practice has three pillars of service: transactional bookkeeping, tax accounting, and value-added services. “The transactional piece of the pie will shrink as a result of blockchain,” he stated, “but the value-added services portion will grow.”
As a result of the computational power and incorruptible capacity that blockchain presents, it’s not hard to envision a future where the simple recording and reconciling of numbers takes a fraction of the time it does now. With so much time freed up, even small practices and independent operators will need to focus on their advisory characteristics to make themselves compelling to current and potential clients.
At this point, we’re just beginning to discover all of the potential applications and use cases for blockchain technology within accounting. What is certain, however, is that blockchain will disrupt the entire industry for the better.
How can you prepare?
When it comes to blockchain-based applications, adoption will move from the top down. Keep your eye on Big Four firms to see how they’re experimenting with blockchain. What sticks with them will eventually trickle down to you. But no matter your practice size, what you can do now is work on improving your added-value services.
The ability to offer sound advice and actionable insights to your clients will prove ever more useful as computation becomes easier. Accounting professionals who offer insights to their clients will never be replaced by technology, because their value isn’t solely based on adding up the numbers. Ask yourself how you can do better for your clients, familiarize yourself with the latest applications, and have a rock-solid understanding of the basics—those three tactics will help you flourish as blockchain moves from the future to the present.