Tuesday, August 08, 2017

Blockchain Useful in Accounting Control and Reporting

Blockchain has the potential of being very useful in a collaborative environment, which is increasingly common in business. There are many aspects of a business where people from different parts of the business need to work together for a common purpose. An example is the workings of the supply chain, which affects an organization from the point of purchase to the ultimate sale of the product. Along the way, people in purchasing, production, manufacturing, logistics, finance, marketing and sales need to have access to information about the flow of goods and the related financial aspects of the processes.

Blockchain is essentially a centralized database, that utilizes cryptography to protect the data from being changed and also facilitates the sharing of the information in a transparent and open manner. The sharing of the information becomes more viable because of the protection against change that the cryptography provides. And the data can provide a clear record of the flow of data and money throughout the supply chain. Another way it is usually described is as a distributed ledger technology, which means that transactions are recorded but are immediately available to others in the blockchain. So any changes can be detected by any of the participants. This reduces the chances of unauthorized changes being made.

Because blockchain offers a means of management control of goods as well as money, it is not only potentially useful for control purposes but also for reporting purposes. With blockchain, a vast array of information can be available on the transactions within the supply chain, including the people involved in those transactions, dates, quantities, products and other aspects of the transactions and assets involved.

Use of blockchain for accounting purposes is in its infancy, but the recognition of the power of this technology is beginning to be recognized more broadly.

There are various good references to follow up on in this area. Deloitte released a very good paper that provides a great overview. It can be found here.

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