There is hardly a difference between blockchain and normal accounting practices. While this new technology may sound complicated, it's basically just fancy accounting software.
You probably first heard of blockchain technology from the rise of Bitcoin. However, this new technology can be used for many different things outside of the cryptocurrency world. It's already revolutionizing the healthcare, manufacturing, and financial industries. And not surprisingly, it's also changing how people practice accounting.
The blockchain can be thought of as a digital ledger for an immense amount of transactions. Whenever a computer exchanges any kind of data with another, the blockchain records it. That record is then used to verify different information.
Not only is blockchain technology changing industries — it's helping people build the future. At MGA, we believe it’s important to understand what changes are on the horizon so that you can prepare your business for it accordingly. In this blog, we dive into how blockchain and accounting will soon revolutionize the industry.
Blockchain Technology Reduces Transaction-Level Accounting Costs
Blockchain technology automatically records every transaction. That means that accountants will no longer need to worry about transactions themselves.
The best example of this can be seen in the most popular way blockchain is used: Bitcoin. The cryptocurrency has value because every exchange of coins is verified. Multiple computer systems confirm that a person has the required amount of coins before they can exchange them.
The same processes can be used by accountants to manage a company’s finances. These processes are already being used to build applications like with Ethereum. It's only a matter of time before those applications are adopted by accountants.
Machine Learning Will Make Transaction-Level Accounting Easier
Not only will accountants be able to keep extremely detailed finances with blockchain, but they will also be able to analyze them easier.
The blockchain is a vital part of machine learning technology. And machine learning is increasingly becoming a vital part of any business. The technology allows professionals to examine their business's data with ease.
With ML technology, new data patterns are being revealed by companies. Many types of technology, including the blockchain, are finding new roles in businesses. They're giving businesses new information and patterns about themselves and their market. This gives them an edge against their competition.
These new patterns and the newfound relationships between data points can help accountants too. Accountants will be able to measure how individuals use company money. They will also be able to maintain accounts with previously unrealistic precision.
Blockchain Technology Shows Where Money is Moving To
Auditors will also benefit from blockchain integrating into the accounting industry. Many tools today only show where money is moving but not who is getting it. Blockchain changes that. Since the blockchain is completely public, auditors will be able to follow transactions without requesting documents. There is no risk of information being withheld.
Auditors will also be able to view specific computers which get bitcoins. That means auditors can track transactions beyond businesses and to individuals. Every time a transaction is made, it is recorded. If an individual uses company funds, accountants will be able to see how and when.
Blockchain and Accounting Are Meant for Each Other
Blockchain is basically the accounting technology of the future. Transactions are automatically recorded and maintained. They're public and trustworthy because they are automatically verified.
Blockchain and accounting can both be complicated topics, though. Fully understanding how they can be used in your business can seem challenging. It takes an expert.
We are here to think ahead with you. We are here to make the complex simple.