How Blockchain Could Automate Low-Level Accounting Jobs

Automation is a highly contentious issue in public discourse. The rise of industrial robots has been linked to millions of lost manufacturing jobs, and the deployment of robotic process automation (RPA) is starting to threaten clerical and back-office jobs as well.

In fact, a PwC study of which jobs are most at risk from automation featured accountants at the top of the list. Another analysis by NPR, based on Oxford research, predicts that bookkeepers, in particular, have a 97.6% chance of seeing their jobs automated.

This automation is partially being driven by AI technologies, with use-cases such as automating auditing, as a managing partner for audit transformation at PwC told CFO Magazine. However, there is another technology that is an even better fit for automating many of the tasks currently performed by accountants: blockchain.

Why Blockchain and Accounting Are a Match Made in Heaven

Blockchain is often spoken about in the context of cryptocurrency, but its applications are far wider. Fundamentally, blockchain is an accounting technology. Accounting is the system of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. Blockchain provides a tamper-proof, decentralized ledger that can be used to track any kind of transaction.

This is particularly relevant for accounting because the need for trust is built into the very fabric of the profession. When an accountant signs off on a financial statement, they are vouching for its accuracy. The blockchain ledger can be used to record and track all transactions, providing an irrefutable audit trail. This could potentially remove the need for human intervention in the auditing process, as all the information would be readily available and verifiable.

In addition, blockchain could be used to automate other accounting tasks such as processing invoices and payments. This would free up accountants to focus on higher-level activities such as analysis and advice.

Implications for the Profession

Accounting is a broad profession that includes many types of jobs, including bookkeepers, forensic accountants, tax accountants, auditors, and more.

The extent to which blockchain will impact each of these job categories will vary, but there is no doubt that it has the potential to replace many lower-level, repetitive accounting jobs outright. This is why the NPR study cited above predicts that bookkeepers have a 97.6% chance of seeing their jobs automated.

In contrast, the likes of CFOs and controllers are likely to be less affected by blockchain automation. These roles require strategic thinking and decision-making, which are not easily replicated by machines.

Of course, this is not to say that all accountants will become obsolete. Far from it. But, as with any major technological shift, there will be winners and losers. Those who are able to adapt and evolve will thrive, while those who cling to the status quo will find themselves increasingly sidelined.

The State of Blockchain Accounting Automation Today

The first programmable blockchain, Ethereum, launched just seven years ago in 2015. In comparison, accounting is often called the "second-oldest profession," so it's not surprising that blockchain accounting automation is still in its infancy.

Despite such a short history, there are already a number of startups working on this issue. For example, Bulla Network turns invoices into NFTs, or non-fungible tokens, which are stored on an immutable, shared blockchain ledger. This allows businesses to track invoices and payments in a transparent and tamper-proof way.

Another company, Cryptio, recently raised $10 million to "automate accounting and tax reporting” by providing software that integrates with popular cryptocurrency exchanges and wallets.

How Blockchain Could Automate Bookkeeping

Clearly, there is growing interest in this space, but it's still early days. So far, most of the focus has been on automating specific tasks such as invoicing and payments. However, blockchain also has the potential to automate bookkeeping, a task that is currently performed by human beings.

This would work by tracking all financial transactions on a blockchain ledger. The data from the ledger could then be fed into accounting software, which would automatically generate financial statements. This would remove the need for human intervention, as the accounting software would be able to do the job more accurately and efficiently.

Ultimately, blockchain has the potential to automate many of the tasks currently performed by human accountants. This could have a major impact on the profession, resulting in the displacement of many lower-level jobs.