How does blockchain technology change traditional accounting?
Blockchain accounting is an evolving topic amongst professionals in the blockchain and accounting communities. While most accounting professionals don’t understand blockchain technology, the tech stack will change many of the GAAP accounting procedures. For example, we no longer have to reconcile a cash account using a bank statement, since the activity and books are updated in real-time. Reconciliation will take the role of identifying uncategorized transactions, which will progressively become automated. Accounts receivable and accounts payable will become auto-reconciled with payments and counterparty vendors because all the activity is occurring on a public ledger. Mint Blue has developed an invoicing solution using NFT’s which makes it simple to manage. Audit procedures will need to be rethought, as much of our current fieldwork is ineffectual considering the transparency blockchain technology offers.
Which organizations conduct business on the blockchain?
Adopting payment rails using blockchain for settlement is inevitable since it’s secure, fast, public, and almost free. Currently, web3 companies, decentralized autonomous organizations (DAO), and crypto software companies, can be found using the blockchain for payroll and development expenses. As a result of the recent FTX fraud, we are seeing an immediate trend, where assets are being removed from centralized exchanges. This will lead to increased Decentralized Finance (DeFi) activity for trading firms and investment funds, ensuring they can’t become victims of centralized fraud. This trend adds another business category that conducts business on the blockchain.
There are currently a few software available, which can be used to assist organizations with accounting for their on-chain transactions. The software allows users to sync transactions and map them to a general ledger. The software can be integrated with traditional accounting software, such as Quickbooks, and allow for financial statements and budget reports. The pace of innovation in Web3 is amazing to watch, as many are simultaneously tackling issues from different angles. While the industry and overall economy are going through its challenges right now, there are inspiring developments taking place behind the scenes.