Though the general popularity of cryptocurrencies has waned a bit over the last couple of years, one concept often associated with them and non-fungible tokens (NFTs) — blockchain technology — remains on everyone’s radar, including corporate accounting professionals.
With that being said, the question that still looms over many minds is whether blockchain tech is just a fad or if it has the potential to be a genuine transformative force in the corporate accounting space. Below is everything you need to know.
Decoding Blockchain: Definition and Use Cases
You can liken the core concept of blockchain tech to that of a digital ledger or even a shared Google Doc, but far more secure. It is a distributed network of records — referred to as “blocks” — that are linked and secured using cryptography. Each block contains transaction data that, once recorded, is virtually impossible to alter, which is the key reason why blockchain is heralded for its security and transparency.
Boosting the transparency of your organization’s transactions is just one of the many exciting use cases of blockchain technology. Others include the following:
Reinventing Transactions: The Major Use Case for Blockchain
With blockchain, your organization can significantly increase its transactional security. Traditional systems are often vulnerable to tampering and data breaches, but blockchain changes the narrative. Its encrypted and interlinked transactions offer a veritable security fortress, making financial records more resilient to fraudulent activity and unauthorized alterations and allowing you to arrange each of your transactions with confidence.
Transparency and Real-Time Auditing: A Controller’s Dream
Consider all the time you’ve spent sifting through financial documents while preparing audits. With blockchain technology, you can effectively streamline the labor-intensive process, saving yourself countless hours and empowering you to focus on more dynamic tasks.
You’ll also enjoy real-time transparency, allowing for continuous auditing and assurance of data integrity. The immutable nature of blockchain means you can trust the data without devoting ample time to verifications, and your business can finally achieve continuous, unquestionable compliance.
Simplifying Payments and Eliminating Errors
For multinational corporations, blockchain can simplify cross-border payments, cutting down on currency exchange complexities and banking fees. Even if your organization does not engage in international deals, the precise record-keeping capabilities of blockchain technology can minimize common accounting errors and boost overall efficiency.
Altogether, blockchain can put common payment errors in the rearview mirror. You can avoid mishaps leading to compliance issues, protect your company’s reputation, avoid regulatory penalties, and pursue new opportunities with fierce confidence.
Supply Chain Clarity
If your supply chain is mired in uncertainty and a lack of clarity, blockchain tech may be vital to maximizing visibility and improving communication between your trading partners. It is a viable tool for reducing or preventing supply chain fraud and ensuring consumers enjoy authentic products, and it provides an unalterable record of every step a product takes, from manufacturing to sale, to ensure authenticity and compliance.
Improving your supply chain clarity through blockchain can also make your business a more appealing trade partner, as organizations at every level of the supply chain want partners that are capable of protecting their bottom line.
Smart Contracts: Streamlining Financial Agreements
Smart contracts are automated agreements executed on the blockchain. Moving your contracts to the blockchain can significantly streamline your financial processes, ultimately saving you time and money.
For instance, you can arrange automatic supplier payments upon receiving delivery confirmation, a simple change that will drastically cut down on manual work and accelerate the speed of transactions. When implemented at scale, smart contracts can yield significant cost savings and reduce friction with your trading partners.
Weighing the Challenges
Admittedly, there are some hurdles to blockchain implementation. Transaction scalability and processing speed remain top concerns, especially for larger operations, and environmental impacts are also a growing concern.
However, what is arguably the most notable concern is its lack of cohesive regulatory frameworks. Blockchain is largely unregulated, and the little regulation that is in place is in a constant state of flux. Therefore, your business must tread carefully as it explores ways to integrate the technology into its workflows.
That said, these challenges should not discourage you from delaying blockchain implementation. Instead, you should taper your optimism for the possibilities of blockchain with a healthy sense of caution. Furthermore, consider implementing blockchain in a limited scope at first to ensure that it delivers the anticipated outcomes.
Thus far, blockchain technology appears to be more than just a fleeting trend in corporate accounting, and even as challenges abound, the benefits are hard to ignore. Its ability to enhance security, transparency, and efficiency positions it as a potent change agent for your organization.
Moving forward, blockchain is poised to play a transformative role in corporate accounting processes and supply chain management. From fortifying financial transactions to offering unprecedented supply chain transparency, its applications are both extensive and impactful.
Therefore, financial professionals — like yourself — should keep a close eye on new developments in the blockchain space so that they can capitalize on the evolving technology.