I had an idea to give the accounting industry a little tickle up so did a bunch of some research and found out there wasn’t much on accounting on the blockchain. There’s a lot of fluff from the “big four” that uses big words like “hash” and “consensus algorithms” along with mentions of single, double and even triple entry accounting but nothing of real substance.
What do accounting applications such as Xero, MYOB, Sage and Intuit actually do? Fundamentally they take transaction data as an input (manually entered, scanned receipts with optical character recognition or bank feeds) and produce nice pretty reports and the ability to create invoices and perform reconciliations as well.
Many of them have wonderful extra features such as payroll and inventory management but let’s just keep things simple and ignore this for now.
Accountants use these applications to perform tasks such as submitting tax returns and understanding the financial health of a company. Again, a simplistic view and we’re talking SMEs here. (Small to Medium Enterprise).
Now imagine the day when your local supermarket accepts bitcoins or any other form of cryptocurrency. Imagine getting paid in bitcoins and paying your suppliers in bitcoins. Current thinking and processes requires the conversion to local fiat currency in order to not break the “accounting” system. Why not re-imagine the accounting system in this new world.
If all transactions are on the blockchain, the blockchain becomes the source of truth. So why not fetch the data from the blockchain. The challenge would not be extracting or manipulating the data but to create an interface (UI) that allows the user to understand what is going on. To be fair, understanding a raw transaction on the blockchain is not for the fainthearted.
Accountants would not disappear as many fear. It’s the accounting applications as they stand today that would. Accountants would use this new application driven by the blockchain and continue to provide value for their customers.
Applications such as Xero, MYOB, Sage and Intuit need to be able to see 5-10 years into the future and be prepared for a radical change. Integrating digital currencies into their current application may seem like a bold step but it’s just a few API calls hooked into an exchange and a pretty logo. The accounting industry is going to be massively disrupted so the large players need to on their toes.