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Understanding Blockchain benefits for CPA firms

By Analytix Editorial Team

January 22, 2019 0 Comments
Understanding Blockchain benefits for CPA firms

Blockchain carries the potential to ring in transformation within any industry where it is applied, and not just in accounting services and financial operations where it currently helps enhance transparency and clarity in transactions. Its emergence is being watched with great interest because the requirement for a trustworthy application for conducting business transactions stays intact as businesses continue to grow outside physical bounds and technology rushes in to ensure a seamless interconnect between essential elements including employees, clients, investors, etc.

Blockchain answers to the search for increased safety and accountability in financial transactions, not restricted by physical boundaries of a single, controlling central intermediary.

  • Blockchain is a chain comprising of ‘blocks’ of transactions bringing together different, unknown entities. This chain is also referred to as ‘blockchain’, differentiated from the application Blockchain by the capital ‘B’.
  • The transactions within a blockchain are verified or consented to, by the involved entities or partners.
  • Transactions inside a blockchain are visible to all parties. Information is also visible and available in a decentralized manner, thus reducing its vulnerability to hackers or unethical collection of data.
  • Data within a blockchain is permanent and cannot be changed, thus adding to its quality of creating trust within the entities or partners involved in the chain but who may not be known to each other.
  • Its ability to function without an intermediate agency such as a bank only adds to the appeal of Blockchain.

Impact of Blockchain on CPA Firms

At its heart, Blockchain is a technology that lends transparency to accounting and financial transactions through verification of the actual exchange. All involved parties can view data, thus there is nothing hidden about the ownership of the transfer or exchange.

Blockchain will change the way all accounting and bookkeeping processes work, including transactions from initiation to reporting.

  • Blockchain technology has the potential to modify entire processes such as financial reporting and tax preparation.
  • Blockchain may bring about changes in not just processes, but entire business models, thus impacting processes, reporting, recording, etc.
  • Blockchain may render redundant the need for an actual accountant to conduct a transaction. Because all transactional data will be already available, the real accountants will be free to take their expertise to the next level: utilizing the data and adding value through their own interpretation and application of knowledge.
  • The actual process of maintaining accounting ledgers may change as Blockchain ledgers will also need to be accounted for, alongside traditional records.
  • Because Blockchain has the potential to replace traditional bookkeeping activities such as reconciliations, bookkeepers may need add value to their work by providing vital insights, such as how businesses account for certain transactions, instead of focusing on chores alone.
  • Audit trails are a vital aspect of record-keeping. Blockchain ledgers reflect transactions as they are and do away with any fear of missing entries or hidden transactions.
  • By directly providing accurate transactional data including history, Blockchain will also lead auditors to focus on studying contexts for certain transactions and why they were conducted, in the first place, thus allowing the business to be audited in its entirety.

Where mentioned, value-addition could involve analyses such as identifying factors affecting the business’s financial health, both positive and negative influences on the business’s worth especially when considering mergers and acquisitions or a sell-out, etc.

The Future?

Is it then just a matter of time before Blockchain is adapted and integrated on a larger scale? Actually, not just yet. A Gartner study says that through 2018, 85% of projects that do contain “blockchain” in their titles would not actually be utilizing it in their business delivery.

With terms like Bitcoins and Smart Contracts already making their way into business communication, isn’t it time businesses started implementing Blockchain?

To answer to these questions, exercising caution is important when considering implementation of Blockchain. For owners and founders of small to mid-size businesses, including CPA partners, as well as for C-level executives in established companies, it is vital to understand the difference between adopting the technology and being prepared for it. Gartner studies indicate that the change that Blockchain will eventually bring about will be enormous and businesses will need to be ready for it. It is said that its business value-add will grow to slightly over $360 billion by 2026 and surge to more than $3.1 trillion by 2030.

However, for decision makers within a business, the onus still lies on finding solutions that focus on challenges faced by the business. Technology alone, including concepts such as Blockchain, cannot resolve problems or cause challenges to disappear.

At Analytix Solutions, we work closely with small to mid-size businesses in diverse ways, including as their partners, to ensure operations are streamlined, challenges are addressed effectively, and technology and automation are implemented as needed. Our professionals bring vast hands-on experience and expertise to provide relevant solutions. This includes assessing the business for whether it is ready for new technologies yet or not. What do you think of this approach? What are your views on Blockchain implementation? Drop us a comment below and let us know your perspective.

Questions about what we do? Call us at 781-503-9004 or email us at [email protected].

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