Still not sure what all of this blockchain buzz is about?
It’s time to get sure. It’s not theory or science fiction. It’s happening now, and it’s poised to rock our profession to its very foundation.
In its simplest terms, blockchain is a decentralized, transparent ledger of transactions across peer-to-peer networks. It started as the technology that underlies the bitcoin digital currency, but its implications go far beyond that.
“Anything you can transmit electronically — which is almost everything — can be securely transmitted and accounted for with blockchains,” said Tom Hood, CPA, chief of both the Maryland Association of CPAs and the Business Learning Institute. “Deeds for mortgages, stocks, any kind of financial transaction, inventory — all of those would be ripe for this idea of blockchain.”
This World Economic Forum video offers one of the simplest, easiest-to-understand descriptions of blockchain I’ve seen so far:
The Wall Street Blockchain Alliance claims that blockchain will be a part of most financial transactions within five years, and that blockchain accounting “could help dramatically slash the cost of accounting, auditing, and compliance.”
That last part is what you should be paying close attention to.
Blockchain’s most obvious impact may be on the ways in which money moves. It provides for “instantaneous movement of money, or real-time financial transactions. That means no more waiting for transactions to hit your bank account or for checks to go through before seeing your financials,” Levi Morehouse writes for Forbes.
But there’s more that accounting and finance pros should be paying attention to — much, much more.
- We’re all familiar with the double-entry accounting system of debits and credits. Blockchain has ushered in the era of triple-entry accounting. “We can see where the buyer’s and the seller’s books exist, but there’s a third ledger — the public ledger, or block — and all the transactions go there, and you can reconcile them and prove that neither one was manipulated,” Hood said. Adds Morehouse in Forbes: “This would revolutionize bookkeeping, making it instantaneous, unchangeable, and more reliable and trustworthy than it ever has been.”
- All of this has huge implications for the audit function. Writes Morehouse: “Transactions that are recorded in real time and can’t be altered can be audited daily, eliminating the need for the expensive audits public companies are required to have every quarter.”
If you’re a CPA, an accounting and finance pro, an auditor, that’s scary stuff. “The blockchain technology has the potential to shapeshift the nature of today’s accounting,” Deloitte reports. “It may constitute a way to vastly automate accounting processes in compliance with the regulatory requirements.”
It would be easy for someone in our profession to just pack it in and say, “What chance do I have?”
But have faith, CPAs. This isn’t the end of the world. Indeed, it’s an opportunity.
“I don’t think it is going to cut our profession out,” L. Gary Boomer, CPA/CITP, CGMA, former CEO of Boomer Consulting and now the company’s strategist and visionary, told the Journal of Accountancy. “But one of the things we have in our profession is the Rube Goldberg machine: A lot of processes that maybe don’t add value. If you’re not adding value, you’d better figure out how you’re going to provide value in the future.”
So how do we do that? According to Hood, it starts with a change in mindset. “It’s the idea that part of our jobs will be automated, but that will allow us to move up into higher-value activity that involves more strategic thinking,” he said.
Hood said that change in mindset includes four key steps:
- Get future-ready: Become aware, predictive of, and adaptive to new technology. “We need to acquire anticipatory thinking and imagine how these technologies can help us,” Hood said.
- Adopt an exponential mindset. Our default setting must be an expectation that things will change exponentially from now on. Can our organizations adapt exponentially as well?
- Start with certainty. “These things are going to happen whether we like it or not,” Hood said. “The corollary is this: If I’m not going to deal with this ‘hard trend’ of blockchain, what are the predictable problems I’ll encounter down the road?”
- Re-imagine your business. “Ask yourself: What could this technology mean to my business and my career?” Hood said. “Then, start to dream a little.”
And remember this tidbit from futurist Daniel Burrus: If it can be done, it will be done — and if you don’t do it, someone else will.
Listen to Hood’s insights on blockchain and the future of the profession in this eye-opening webcast: