There’s been a lot of change for finance and accounting lately. We know. And it may feel overwhelming to have to keep up with new technology and the ever-increasing amount of available data to analyze, while trying to figure out if the robot uprising will be a threat or a liberator.
As if all of this isn’t enough to make your head spin — and we know it is — along comes blockchain technology. Tempting to ignore it and hope it goes away, right?
Now is the time for accounting and finance organizations to research and discover the ways in which blockchain can benefit their companies
But it’s not going to. And based on its current trajectory, it could impact your organization sooner than you think.
Disruption in the finance industry has become the new normal, and migrating to a growth mindset is the most effective way for accounting and finance professionals to prepare for what’s ahead. It’s also the only way to switch up the typical pattern of lagging behind as the last industry to adopt cutting edge technology.
So, What Is Blockchain?
A blockchain is a distributed, digital ledger with built-in security that records transactions in real-time. Every ten minutes, all transactions are verified across the network, reconciled, permanently time-stamped, and stored in a block that is encrypted and inextricably linked to the preceding block. This creates a chain. A blockchain.
Blockchain is the technology that powers cryptocurrencies such as bitcoin and Ethereum, but its potential for accounting and finance extend far beyond digital currency.
An article in AccountingToday predicts that “blockchain technology may be more important to the accounting profession and its clients than artificial intelligence, robotics, networks and sensors, drones and nanobots.”
The Benefits of Triple-Entry Accounting
Blockchain is structured as a triple-entry system, with both sides of every transaction simultaneously and directly recorded onto a shared ledger, creating a verifiable cryptographic receipt — or digital signature — that is visible to both parties.
The process provides a permanent audit trail, significantly reduces the risk of accounting errors, and guarantees the integrity of financial records. It eliminates central points of attack and protects the ledger from corruption and fraud because transactions can’t be retroactively altered.
It also holds the potential to revolutionize the areas of documentation, invoicing, and payment processing, erase waiting periods and reduce the cost of global transactions.
The Trust Protocol
The heightened security of both data and information is one of the most valuable components of blockchain technology, and it establishes an unprecedented level of trust. The transaction itself can be fully trusted without having to trust the other party.
As a result of this trust protocol, blockchain is being cited as the next wave of disruption, especially for global companies and auditors.
According to an article in Fortune, “The system uses complex mathematical functions to arrive at a definitive record of who owns what, when. Properly applied, a blockchain can help assure data integrity, maintain auditable records, and even, in its latest iterations, render financial contracts into programmable software. It’s a ledger, but on the bleeding edge.”
Technology Searching for a Purpose
Now is the time for accounting and finance organizations to research and reveal the ways in which blockchain can benefit their companies. The technology holds the potential to provide a seemingly limitless number of solutions, and it’s growing fast – really fast.
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