We have experienced enormous technological innovation around us in the past decades. Experimenting with new technologies and implementing them across various fields has brought disruptive changes in the industrial workflow. While in all those years we replaced manual work across many sectors with automated software programs, we could not automate such jobs or processes that required trust.
Accounting is one such sector that still remains labour-intensive. The current accounting process relies on mutual control systems that require to manually oversee all documentation to ensure accuracy and validity of records. This demands for time-taking audit processes, duplication of records and manual validation of each document. And so far, we have barely used any technology to automate these processes due to security and trust issues.
That, however, can change with blockchain technology. Blockchain is a distributed ledger technology that automatically imposes trust without the need for any third party. Its self-executing digital contracts bring the promise of automation in accounting. Let’s take a look.
Reduced paperwork, cost, and time
Using blockchain as a base layer for accounting processes will provide for a single source of all financial and operational records. As all participants will be able to access the information stored on the blockchain in real-time, there will be no need for repetitive documentation of the data. Additionally, due to the transparency of blockchain, all accounting members will be free of the cumbersome process of verifying new copies of the documents every time. While human oversight will still be required, it would be considerably reduced.
The reduced need for paperwork and auditing to verify the documents will itself cut short the time spent in the accounting process. Companies will also be able to largely reduce the manpower they employ to accomplish the job and hence spend less in the process.
Increased immutability and trust
Blockchain is a system widely known for its ability to maintain trust in a system without human intervention. For example, the Bitcoin network tackles the problem of double-spending in a peer-to-peer system without any third party involvement.
Similarly, enterprises can use blockchain networks such as Alacrity to store their record in a transparent yet immutable manner. Each bit of record they store on the blockchain is tagged to a digital code — known as a hash — that remains immutable over time. This will help institutions prove the authenticity of their records by generating a new hash at any time in the future and comparing it with the old one. Even the slightest change in a document will create a huge difference in the hash string, thus, making it a reliable system to prove the authenticity of records.
There’s a common notion around technological disruption that it costs human jobs. However, the automation of the accounting processes will not cost jobs but will surely transform the way accountants go about with their work. This is an inevitable change and might feel uncomfortable in the beginning, but it will surely be worthwhile given the disruptive potential blockchain promises for accounting.