The phrases blockchain and artificial intelligence are mentioned so frequently in academic articles, practitioner publications and the general media landscape that they may have overshadowed the previous hot topic of data analytics.

With all of the coverage, debate and questions surrounding these areas, it would be relatively easy to get lost in the weeds with what these technologies mean for the accounting profession. In addition to, and compounding, the potential confusion surrounding these topics is the somewhat justifiable fear that these technologies will automate large functions of the accounting profession. Accounting professionals, trained and educated in quantifying data, analyzing different streams of information, and increasingly technology savvy, are facing the reality that technology may surpass, and ultimately, replace many practitioners.

Such a perspective, however, only represents a partial and incomplete view of the implications that blockchain and artificial intelligence will have on the profession. Bitcoin may be the most commonly associated term and aspect of blockchain technology, but that only represents the proverbial tip of the iceberg. Although some organizations are indeed using bitcoin for processing transactions, are accepting payment from customers in bitcoin, or the other various cryptocurrencies, this is only one potential implication for the accounting profession. Regardless of whether an accountant works in public practice, private industry, academia or a consultative capacity, it is critically important to understand the potential changes that are coming.

Blockchain technology has the potential, and already is, changing how the accounting profession operates and will navigate the business landscape moving forward. While the specific implications of these changes will differ from organization to organization, and some of these changes will occur faster than others, there are some themes that appear to be consistent. Clearly, this short list is not meant to be all-encompassing, but rather is meant to focus the conversation on the changes blockchain is having in a manner that is productive and applicable to practitioners.

To do that, however, accountants need to understand what exactly blockchain technology is, and what is might mean for the profession. Let’s take a look at three things every accountant needs to know about blockchain

1. Blockchain secures information and reduces alterations.

Although the basis for the spread of blockchain technology is the internet, and some uses have involved criminal enterprises, the basis of the technology is the encryption that secures transactions and records. To put it simply, every transaction that is conducted using blockchain technology is encrypted, the involved participants are identified by a string of characters, and after a certain period of time has passed (which may vary) all of these transactions become part of the block. After this block has been finalized, it is broadcast to all parties associated with that network, or chain. If it is altered at a future date, reviewers of the block (record) will be able to identify when due to time stamp functionality. Clearly this technology will lead to changes in not only how audits are performed, but will also drastically reduce the amount of time needed to verify or confirm certain balances.

2. Blockchain will reduce errors.

Especially as it pertains to accounts payable or accounts receivable, the potential for blockchain to be accretive from the very beginning is a relatively straight forward concept. Building on point 1, if the participants in a certain transaction are identified, the time and date of the transaction is verified, and the associated data is secured, the possibility of errors decreases dramatically. Specifically, the number of transposition corrections, verification of payments, and other lower-value activities can be automated by blockchain and ultimately replaced with higher-value activities. Reducing errors, both during the audit process itself as well as during ongoing operations, will add value to clients in a quantifiable manner. This may certainly place some current accounting jobs in jeopardy, but also provides numerous opportunities for accounting practitioners willing to learn, and eventually master, blockchain technology.

3. Accounting will become real time.

Just like doctors are increasingly able to monitor the health of patients in real time thanks to advances in technology, blockchain technology will help enable accountants to monitor financial performance in real time. Due to the fact that blockchain technology is based on, and leverages, an internet-based and decentralized platform, it will be simpler than before to track and monitor the inflows and outflows from a business. Building on the increasing utilization of cloud computing technology by both accounting organizations and client firms, this facet of blockchain represents a logical step in this same direction. Leveraging these advances in technology, and the ability for both business owners and accountants to keep abreast of changes in the business will only help accountants elevate their position to that of trusted business advisor.

Blockchain technology is already disrupting the accounting profession, and will continue to do so moving forward, but it will deliver both opportunities and challenges. Understanding the implications and possibilities of this technology on the profession is essential for practitioners seeking to keep up to date and relevant in a rapidly changing marketplace. Technology tools can provide opportunities, and CPAs have both the mindset and opportunities to take advantage of them.

Sean Stein Smith

Sean Stein Smith

Sean Stein Smith, DBA, CPA, CMA, CGMA, is an assistant professor at Lehman College, part of the City University of New York, and a columnist for Inc.com.