Blockchain Accounting Software: How Crypto Changes Things

The adoption of blockchain technology in accountancy is already in progress, led by the top players in the industry. Here, the accountants in the coming years will have much more clarity regarding maintaining the accounting ledger. Many blockchain protocols exist on open-source software, which is software whose source code is available publicly and open to improvement from anyone.

  • Needless to say, the cryptocurrency ATM business relies heavily on blockchain.
  • Plus, understanding the basics of blockchain will help you follow future updates and be more prepared.
  • It will be important to monitor the progress in the take-up of blockchain in the future (Bonsón et al., 2019; Gietzmann and Grossetti, 2019; Bonsón and Bednárová, 2019).
  • Understanding what we have learnt and how blockchain technology is impacting accounting is of benefit to everyone connected to this area.
  • Crypto accounting software automates the accounting for organizations and individuals that trade cryptocurrency, use cryptocurrency to make payments, or accept cryptocurrency for their receivables.

Some authors call for the appearance of a new brand of auditor that can offer attestation services for independent evaluations of blockchain controls (Canelón et al., 2019; Sheldon, 2019). Blockchain represents an opportunity, not a threat, with future accounting and auditing services likely to include some consideration of blockchain. Although the technology is rapidly evolving and will likely have an impact on accounting and auditing, some skepticism is warranted regarding how to write a grant proposal for a small business potential benefits and ease of implementation. For now, the benefits are likely being oversold, while the costs and difficulty of implementation are likely being undersold. The subject of cryptocurrency is complex, and its decentralized nature means there are a number of regulatory issues accountants will eventually have to deal with. Furthermore, governments are typically reluctant to fully embrace financial and monetary changes that they can exert little control over.

Blockchain Accounting Software: How Crypto Changes Things

To gain real efficiencies in the use of blockchain or any technology, there is a need to reengineer, rather than just automate, existing processes. Unfortunately, many of the proposals for the use of blockchain are aimed at automating existing processes, typically in an approach to leverage the immutability and digitisation of paper, but generally do not propose or use changes in the processes. The disruptive potential of accounting technologies can only be fully realised with a similarly profound revolution in accounting thinking. Without an accompanying “mental revolution”, new technologies may result in incremental as opposed to step change. Even though, for most industries, blockchain is still a new and not yet well-established technology, the World Economic Forum estimates that, by 2025, at least 10% of global gross domestic product (GDP) will rely on blockchains.

  • The invention of blockchain accounting software is further revolutionizing the accounting industry.
  • Your organization should be performing regular maintenance checks and upgrading software periodically.
  • The authors identify current trends, analyse and critique the key topics of research and discuss the future of this nascent field of inquiry.
  • Despite a pronounced funding downturn during the Crypto Winter, enterprise-focused companies like Bitwave have continued to raise money, such as Fordefi, which raised an $18 million seed round in November to launch an institutional DeFi wallet.
  • Benefit from joining established networks or build and scale your own along side experts.

The simultaneous protection of data privacy and maintenance of data accuracy is an important area for future research. Further, the ways of creating effective smart audit contracts and smart reporting contracts should also be studied with a special focus on executing traces and enforceability (Schmitz and Leoni, 2019). However, some researchers are not convinced that blockchain will dramatically impact the auditing profession. Rather, they suggest that auditing will take on new features and become more complicated (Dai et al., 2019; Issa et al., 2016). Distributed public recording on the blockchain will allow real-time audits in many locations and organisations simultaneously (Issa et al., 2016). These authors argue that auditors will need improved skills to audit the data not only for one company but also for the whole accounting ecosystem.

The divergence of crypto classifications means that worldwide regulation and availability of information on cryptoassets will be the most important factors for their spread. As a result, we see the need for a proactive regulatory framework rather than merely reacting to questions regarding the regulation and accountability of cryptoassets. There is no commonly shared point of view among researchers on the best way to regulate cryptoassets. Some say that they fit in with the existing accounting standards, while others state there is a need to develop a new regulatory framework that will decrease the probability of fraud (Auer, 2019; Pimentel et al., 2019). In December 2017, SEC Chairman Jay Clayton stated that ICOs are vulnerable to fraud and manipulation because there is less investor protection than in the stock market (Clayton, 2017). Therefore, we assume that automating data collection and storage using blockchain will not mean the auditing profession disappears.

1 The changing role of accountants

This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. If this subject interests you, understanding closing your books will help you more easily see the promising value of blockchain.

What is Blockchain Accounting Software?

The immutability of blockchain technology leads to lowered cost of regulatory compliance and more efficient audits for accounting firms or auditors. Whatever your stance, it’s hard to ignore the growing number of organizations accepting cryptocurrency. This has made blockchain accounting a hot topic, especially for those in the accounting profession. Schools and big accounting firms like Deloitte are already educating on blockchain accounting. In the first step of this implementation methodology, an organization must review the current system and processes to get a full picture of how the business is working and where there might be pitfalls.

Blockchain is still relatively new, with the development of software being rather dynamic; however, figure 6 lists and briefly describes some of the products in the marketplace that attempt to integrate blockchain technology. Cons
Accountancy practitioners routinely make adjustments to financial records. This includes integrating data from a prior period as those data become available (accounting for subsequent events or adjusting for under/over applied overhead are examples). The ability for a double-entry accounting system to make such adjustments is crucial to its utility in the modern world. Blockchain negates this ability, making substantiation less beneficial than promoters claim.

How Will Blockchain Technology Affect the Accounting Industry?

In blockchain, the transaction verification process is not managed centrally. Rather, it involves all the computers in the network, so blockchain does not suffer from point of failure events. Nor can individuals collude to override controls or illicitly change or delete official accounting records (Wang and Kogan, 2018).

How to Use Blockchain Technology for Your Business

The Accounting industry will undergo training programs to upskill their employees. Finally, accountants can set a different set of instructions for important entries. Here they can opt for approval from higher authority for auditing purposes. Benefit from the near real-time, point-to-point transfer of funds between financial institutions, removing friction and accelerating settlement. Depend on faster and more accurate reporting with an automated compliance process that draws on immutable data records.

Table 3 shows the total citation counts for the top 10 articles as listed in Google Scholar citations (5 March 2021). Figure 1 demonstrates that the volume of articles on the topic is increasing annually. The first articles began to appear in 2015 and, by 2019, 4 articles had increased to 40 papers, with 35 already published just in the first half of 2020. LDA allows us to explore latent relationships between terms and topics in a sample, identify the most representative articles for each topic and identify the trends within the topics. Using LDA helps us capture the idea of a document being composed of a (predetermined) number of topics that represent a probability distribution over a vocabulary.

Blockchain and Infrastructure

Blockchain is a decentralized, distributed ledger that focuses on the ownership and transfer of assets. It records transactional data in a way that’s almost impossible to manipulate. Xero is an online accounting software platform that allows businesses to see their cashflow in real-time. IBM offers a range of ERP solutions for your business, including consulting services for SAP on IBM Cloud, Microsoft Azure and AWS Cloud.