5 Things Firms Need to Consider About Blockchainby
At every accounting and finance conference, regardless of where the attendees are employed, blockchain is almost always in the top three topics of discussion.
Such excitement and buzz is not entirely unjustified – the core functionality and components of blockchain technology seem to be nearly a perfect fit for accounting professionals seeking to elevate both themselves and the services they provide. That said, and even with all of the discussion, debate, and investment underway in this area there does remain quite a bit of confusion when the following question is asked: So, what now?
How do practitioners, accounting firms and organizations seeking to keep a competitive advantage versus the market take those important next steps toward blockchain implementation? Laid out in this piece are some key questions, considerations, and ideas to keep in mind as the blockchain wave continues to build.
Every organization is different, obviously, so it’s important to always evaluate technology decisions with your team before making any final choices. These questions, ideas, and concepts are based on two presentations I gave, and dozens of conversations I had the good fortune to have at the recent Scaling New Heights 2018, held in Atlanta.
Let’s drill down and get to some of these ideas:
- Talk to your clients and customers – This should be a painfully obvious point, but this is something I have seen overlooked time and again, from practitioners employed all over the accounting spectrum. Technology is exciting, is having a dramatic impact on both the accounting profession and business at large, and holds tremendous potential for forward looking professionals. That said, your clients, customers, and colleagues need to be educated about these tools and on board with the same level of experimentation and implementation you would like to embark upon.
- Figure out if blockchain is even an appropriate fit for your organization - Amidst all of excitement, presentations, handouts, and videos promoting the virtues and benefits of blockchain it might seem like blockchain is a perfect fit for every accounting organization or department. This might not be the case, however, as there are numerous technology solutions and services that currently provide components of the functionality blockchain promises to deliver. Before taking the dive into the blockchain pool, be sure to conduct a review of the current technology solutions you are using to see whether blockchain is, at this time, a good fit for you and your firm.
- Understand that there isn’t just one blockchain – Blockchain discussions and articles, including even this article, tend to label and introduce blockchain as if it is just one large technology platform. That could not be further from the truth, and even more inaccurate when discussions about cryptocurrencies are included. In 2017 alone, there were over 900 different cryptocurrencies launched, many operating on unique blockchain networks, and over 50% of these new cryptocurrencies have already failed. Many of the largest organizations, including the Big 4 accounting firms and large financial institutions, are investing billions of dollars and thousands of employees to develop proprietary blockchain platforms. Understanding the variety of offerings is an essential step toward figuring out which option works for your organization.
- Decide which pieces of your practice will benefit from blockchain – Every accounting firm is different, and every client is unique - with that said it is up to you to figure out which type of blockchain service would be most practical. For example, there are blockchain platforms that focus on document transmission and storage (Factom), blockchains heavily focused on the development of smart contracts (Ethereum), and blockchains developed specifically for financial institutions (Ripple). Doing your homework, taking advantage of open source learning opportunities (like Coursera, Udemy, and other MOOCs) will put you in the position to offer realistic and practical advice.
- Link cryptocurrencies and blockchain for your clients and colleagues – This is an important aspect of the conversation to acknowledge, and positions CPAs and other accounting practitioners as the go-to experts. We all may realize that cryptocurrencies, at least under current tax law, incur a tax liability every time they are transferred, but do your clients? Also, do all of your clients realize the connection between cryptocurrency and blockchain? Like it or not, accounting professionals are at the forefront of technology transformation, and it is up to use to ensure our clients and customers remain well informed about these emerging issues.
Blockchain is an exciting technology and has tremendous potential to reshape virtually every aspect of business within the next 5-10 years. At this point, it is important to remember to treat blockchain like any other potentially game changing technology or tool.
Do your homework, asses your current practices and tools, and be proactive with both your internal and external clients. This will be work, and might be uncomfortable at some points, but will leave you well positioned to be your clients’ advisor of choice as this technology becomes more mainstream.
Sean Stein Smith is a professor at the City University of New York – Lehman College. He also is the chairperson of the NJCPA's Emerging Technologies Interest Group (#NJCPATech). He serves on the Advisory Board of the Wall Street Blockchain Alliance, where he co-chairs the Accounting Work Group. Sean is on the Advisory Board of Gilded, a...