Cryptocurrencies have changed the international financial system in ways nothing else has. They have gained mainstream popularity in recent times. The rise in popularity is because of the features of these virtual currencies.
Firstly, they are decentralized and hence not subject to government regulations. They also offer anonymity to users who are looking for means to privately transfer funds. And, they are secure.
However, cryptocurrencies have features that could potentially cause problems in the future. For instance, they are notoriously volatile. Their values rise and fall in no given pattern.
Blockchain, a system that cryptocurrency uses, holds promise for companies. Hence, controllers and Chief Financial Officers (CFOs) ought to learn about the system and how to implement it for their businesses. This article examines blockchains, how they benefit businesses and how CFOs can optimize such benefits.
What is Blockchain?
Blockchain is a database or, simply put, ledger that records cryptocurrency transactions. Unlike typical ledgers, blockchain ledgers distribute information across a network of computers in various locations. These computers function as servers and are managed by virtually everyone on the network.
New transactions added to the ledger are called blocks. Each new transaction (or block) has a finite storage capacity. It builds upon the previous and gets linked to its predecessors when it gets filled up, forming a “chain”. This adds to the reliability of blockchain because for any block to be altered, the previous ones on the chain have to be changed too.
Every transaction that is added to the block has to be verified by a consensus of the users of the blockchain. Additionally, as alterations are made, they appear in real-time on all of the computers that form part of the chain. Therefore, it is impossible to manipulate the process without alerting everyone on the system.
The Potentials of Blockchain for Companies
As a controller, you should know that Blockchain has huge potentials that could be beneficial to your company. Here are a few ways that Blockchain can serve you best.
Ease of Accounting
The Blockchain ledger provides a full view of all transactions. This is helpful to CFOs looking to track transactions in real-time. They will be able to follow payments from where they originate to the termination point. A spillover effect then will be used in setting limits, efficient record keeping, and enhanced policy-making process.
Speed of Transactions
Aside from improving the ease of transactions, Blockchain speeds up transactions across countries. Traditionally, sending money between countries takes a few days. The process is subject to any rules that the sending and receiving country imposes. Hence, clearing sent funds can take even a few days more.
However, this is not the case with Blockchain transactions. Sending funds takes just a few minutes. The parties involved are just the sender and receiver. This effectively cuts out the intermediary fees typical in such transactions. CFOs and controllers can take advantage of this while making international transactions.
Trustworthiness
One of the chief attractions of the Blockchain is its near invincibility. It is decentralized, meaning that no single entity has the power to manipulate the system’s processes. At least, none have been able to achieve that so far.
Furthermore, it is possible to see any alterations anyone makes on Blockchain. It also makes it hard to hack the chains or tamper with the records it holds.
This makes for greater accountability. CFOs who use the blockchain can easily identify alterations. In addition, when an employee commits fraud, it will be easy to trace the origin of the fraud, the specific alterations made, and resolve that quickly.
What CFOs Need to Know
It is clear that integrating Blockchain technology into financial systems holds a lot of promise for companies. However, there are some important details that CFOs need to be aware of. Here are some of them:
Time and system compatibility
Designing and integrating Blockchain technology into existing financial systems will take time. This is because the systems being used in your organization currently may be incompatible with Blockchain technology.
Hence, companies usually set out a transition period to allow the two systems to get to run concurrently as the financial systems ease into Blockchain technology. CFOs and controllers need to bear this in mind and prepare for that transition period.
Possibility for transparency
Transparency regarding financial transactions is very important for company growth. It instills public confidence in the company’s capabilities. It fosters a sense of partnership for employees, as they can see how their daily contributions help build up the company.
However, companies sometimes struggle with reaching their transparency goals because of the sensitive nature of financial transactions. Making the system open could mean compromising the integrity of the data they put out.
Fortunately, CFOs and controllers can hide sensitive data and still maintain transparency by using Blockchain. This technology employs cryptography to secure user data. Hence, only those who are able to decrypt the data have access to it. And so far, no one has been able to decrypt the system.
Collaborations
Utilizing blockchains will also improve the reporting process. Subordinates can provide reports in real-time to superiors. Employers also can supply feedback where necessary, improving the ease of financial transactions.
Conclusion
Blockchains hold sound promises for companies. Financial transactions could become a lot more seamless, faster, and transparent. CFOs can jump on the train as early as possible. The learning curve is pretty flat. Thus, controllers and CFOs who are ignorant about the system can quickly get apprised and apply their knowledge immediately.
Looking to learn more about technology? Controllers Council is a national community and platform of Controllers, Accounting and Finance professionals focused on accounting best practices, information and resources, recognition and networking. Membership has many features and benefits to propel your career and expertise, and to be an active participant in our exciting community. Discuss topics like accounting and CPA compensation and more in our forum. Become a member today.
Additional Resources
How Much Time Can You Recapture Through Technology?
Five Technologies Controllers Should Know in the 2020s
Flexibility Today and in the Future: Planning Your Bounce Forward in 2021
