While few may consider accountants to be on the cutting-edge of technology, that thinking is about to change. No longer will accountants and bookkeepers be categorized as bifocal, corduroy-wearing bean counters, but in the coming years the industry as a whole will play a significant role in driving the adoption of one world-changing technology.
That technology is blockchain.
For the less technically inclined, blockchain can be difficult to comprehend. To understand, think of it like this: Each “block” is a record of a transaction, and each of these blocks is added to a public “chain.” In relation to accounting, companies are able to add their transactions to a shared register, which is nearly impossible to falsify or destroy.
Once widely adopted, this will make all financial transactions permanent, immutable and transparent. It’ll be a single source of information that all parties involved can collaborate on; and eventually, will have the power to end the need for audits all together. With such applicability to the industry, it’s just a matter of time before blockchain turns it on its head. So how can accounting really prepare for blockchain, and what needs to happen before it takes off?
Accounting guidance for digital currencies
According to U.K.-based Juniper Research, 57 percent of global corporations are considering – or are in the process of – implementing blockchain infrastructure. For those companies that have already started, two-thirds expect to have integrated it by the end of this year. In fact, giants like Microsoft and Wikipedia already accept the digital payment.
Clearly, accountants and bookkeepers need to be on the same page about how to account for the currency. But today, this isn’t the case. Some accounts might file it under electronic money. Others file it as intangible assets, or as inventory. And well, this confusion isn’t doing the industry any favors. Accountants’ fragmented beliefs about how digital currency should be audited can easily disenchant investors, as well as researchers and developers.
To remove this roadblock and resolve accountants’ questions, an accounting standard needs to be developed for digital currencies which states exactly how to handle them. In fact, the Financial Accounting Standards Board (FASB), a body whose aim is to establish accounting principles in the U.S., has already begun researching the topic in order to develop a proper guide. It’s not until accountants all accept one principle, that blockchain use can truly move forward.
Adoption of a single protocol
As you know, there is no one protocol for B2B payments at current — there are more than 6,500 banks in the U.S. alone. Blockchain, on the other hand, provides one single protocol to move money easily between businesses, no matter which accounting system is being used. The only thing that needs to happen now is for the accounting system companies to accept the adoption of this blockchain protocol.
And why might this prove difficult? Well, the change would essentially make these companies too similar to their competitors. Imagine this: One company that uses Sage buys from another that uses QuickBooks. With a single blockchain protocol, transactions between them would settle in real time, within the same payment network, through the cryptocurrency of choice — like Bitcoin, or Ethereum. Settling payments between these different accounting systems would then become as easy as sending an email from a Yahoo account to a Gmail account.
But if each email platform was capable of transferring data — but not much else — there wouldn’t be much difference between them, would there? In a similar fashion, accounting systems implementing a single blockchain protocol would make them too similar, and eliminate any competitive edge they possessed. And for many of these companies, that’s a scary thought. However, there might not be a way around it. If accounting systems don’t adopt this blockchain protocol, they’ll be left in the dust.
To move forward, the top 10 accounting systems need to set up an assembly, and join across all industries to agree to implement the protocol. Once a network is set up to accept these digital payments, the conversation will turn to how these systems can differentiate themselves from everyone else. Undoubtedly, each system will implement new features to set themselves apart from the crowd — and all in all, it’ll be the consumer who wins.
What about accountants themselves?
For accountants not privy to technology, blockchain might not seem like a welcome change. However, it does bring tons of benefits to the industry — and that’s the most important thing for accountants to embrace. To get ready for the blockchain revolution, accountants must force themselves to be proactive about new technology so that when the massive change lands upon the industry, they don’t feel miles behind.
This includes staying up to date on third party application, as well as implementing technology that enables them to scale, such as automated billing, for example. Another great idea is to attend accounting system expos or conferences to learn about all the industry changes — think Sage Summit, or QuickBooks Connect.
It’s easy to read about blockchain, and set it aside in your mind as a technology of the distant future. However blockchain is happening now, and it’s up to the accounting industry to get the ball rolling and drive its adoption for everyone. Because we promise you: It’s not going away anytime soon.
Repost from original publication: https://www.accountingtoday.com/opinion/how-accountants-can-prepare-for-the-blockchain-revolution