Category: Technology

Blockchain is a Database. Get Over It. Really. (Part Two)

(Editor’s note: I recently penned a column for The CPA Practice Advisor titled,
“Blockchain is a Database. Get Over It.” This article is a followup to that article which addresses some additional issues which I was unable to address in the original article. This article has been adapted from an e-mail I sent in response to a reader’s comment about my lack of enthusiasm for current deployments of blockchain in accounting – because it’s an emerging technology.)

Here are direct quotes from two major media articles from Q1 2018 which I reference in my CPA Practice Advisor article titled, “Blockchain is a Database. Get Over It.”:

“It reflects that (blockchain is) a big bubble,” said Huy Nguyen Trieu, an associate fellow in fintech at the Oxford Said Business School, on the spate of company rebrands.

From Reuters’ Alasdair Pal, “Blockchain Name-Grabbing has Echoes of Dotcom Bubble”, February 8, 2018

And here’s another quote from The Atlantic:

Bitcoin might be where Pets.com was in 2000—a technological curiosity in search of an enduring business need. But blockchain is not where the internet was in 2000. Even blockchain’s biggest defenders can’t say what the technology’s most obvious consumer use-cases are going to be, because they plainly don’t exist yet. It is possible they never will.

(From The Atlantic’s Derek Thomson – “It is Silly Season in the Land of Cryptocurrency”, January 10, 2018 (emphasis added)

The point I’m trying to make is that blockchain is an application platform, and the applications – not the platform itself – are what’s going to change how we work, and they largely don’t exist outside of a few pilot projects as of yet. I feel like much of the current fascination/obsession/cult of blockchain is not much more than misplaced enthusiasm for the get rich quick schemes surrounding the cryptocurrency asset bubble – say 80% of it is this – there are some important parts (20%), but you should be careful. While those apps will be useful eventually, I think you should focus on what will make you money instead of what is shiny.

Let’s take another approach to explaining this- imagine if you and I were transported back in time to our 1970’s selves (sans cigarettes and leisure suits) and someone was talking about how SQL-based databases were going to change the world. I would say sure, SQL is an important technology for software developers, it’s a great technology, and the applications did change the world – but for the end user accountant, auditor, or bookkeeper, SQL in 1975 was a tool which needed to be dealt with once there were applications which used this platform. From an accounting and auditing perspective, IT auditors, internal auditors, and IT specialists who worked with CPA firms were the only people who did much with SQL until the late 90’s.

For the average, non-Big Four firm, there are so many other technologies which need to be higher than blockchain on the priority list – CRM, social media, automation of bank feeds and transaction recording, OCR and AI technologies like those utilized by Receipt Bank and others, data analytics and testing tools like TeamMate Analytics – the list goes on and on. (On that list, blockchain should be just below a Myspace page and just above alpha-testing a self-driving car on the current technology priority list for most users and firms.) While the tools utilizing this platform are evolving, the apps just aren’t there on a widespread production basis at this point. In my opinion, there is much more profit to be earned by dealing with practical, actionable technology which you’re not currently using rather than trying to leapfrog to blockchain unless you have specialized needs and are going to have custom code written, and then, it’s still a crapshoot.

I do think that blockchain will be a bigger deal in the governments of most other industrialized countries before it is in the US due to the comparatively poor state of US government-side technology and the fragmented nature of regulation in the US compared to the rest of the world. In Canada, everyone can file all federal and provincial tax filings with the Canadian Revenue Agency online using the same set of rules and they take all returns. Canada also has a standardized system for classification of accounts which allows financial reports to be filed electronically with the government (GIFI), which is built into Caseware Working Papers (90% market share in Canada). In the US, we have to file with so many different jurisdictions and regulators, with different taxability rules, and many of the states can’t really handle e-filing, so there’s not the incentive for a centralized blockchain like some of the ones proposed for recording VAT in Europe (See https://blog.kpmg.lu/how-blockchain-could-help-fight-or-even-end-vat-fraud/ for more information here). As a result, there’s not the same need

The Indian financial system has had a number of radical reforms after its implementation of a national value added tax (GST) in 2017. The government is trying to eliminate the non-taxed cash economy by (1) eliminating large denomination bills, (2) making their version of ACH payments very inexpensive (but not free), and (3) reducing the supply of paper banknotes in circulation. While some think that blockchain may eliminate banks in India by 2030 (https://yourstory.com/2018/02/blockchain-state-bank-of-india/), my gut says that the political power of banks/financial intermediaries and the state’s compelling interest in controlling money laundering and the cash economy will present massive barriers to its implementation and widespread adoption of cryptocurrencies. Anything that takes political power away from those who have it (and the related money and control of institutions) will be resisted vigorously – and remember that the money laundering penalties in many countries are beyond draconian in most cases – so the penalties for being an early adopter are more like “life in prison” and less like the fines for driving a cab without a medallion.

I hope I’m wrong and blockchain changes our lives sooner rather than later, because it’s a very cool technology and addresses the data integrity issues associated with electronic data very elegantly in a tamper-resistant ledger.

The reality of the 25 years I have been in the profession is that some really smart people said that computers were going to displace all accountants by 2000, then other experts said that outsourcing was going to kill the jobs in profession by 2010, and now we have people saying that blockchain/AI/machine learning is going to kill all accounting by 2020. My response to them is that it’s 2018, and we’re all still here – I don’t think anything will kill accounting totally. While it may change the way we work eventually, consider how much accounting has changed in my 26 years in the profession:

  • Have you seen a 4, 5, 7, or 14-column pad lately? (I saw the first one I’ve seen in about three years being used by a CPA at an industry meeting in New York a couple of weeks ago)
  • When was the last time your hand touched a colored pencil, other than when doing art or helping your kids with their homework?
  • Do you have a 10-key adding machine on your desk? When was the last time you used it? Can you still buy ribbons/ink for the one you have?
  • When was the last time you wrote and mailed a paper letter to anyone other than a government employee or an attorney?
  • When was the last time you sent a fax to anyone other than a government employee who doesn’t have the technology they need at the office? Do you still even have a physical fax machine?
  • Do your new staff know how to use cursive handwriting? (Surprisingly, many do not.)

(By the way, I did all of those things on a daily basis when I started in the profession, and now I do almost none of them in a given day.)

Technology isn’t going to eliminate us unless we let it by trying to stay in the past and ignore how it changes our work. I would argue that the tools we’re going to use in the future and how we work in the future are going to change in the next 25 years at least as much as they changed for me in the last quarter century. We’ll have to have new tools which don’t yet exist to audit blockchains effectively – but those tools will become available in the next couple of years. So learn a little bit about blockchain – I’ll be doing some webinars to explain some of the concepts in the future – but don’t let the fear of missing out (FOMO) drive you to try to force-adopt it before the tools are ready for what you do.

Right now, for most people, blockchain is a bleeding edge technology, and almost all of you should wait until it’s a little farther along before you try to embrace it – but you should learn about it and be ready when the apps arrive.  I hope you’ll join me at the remaining 2018 K2 Technology Conferences to learn about this topic and many more strategic technologies which will affect you in the future.

Some CPE webinars which may help you learn more include:

AICPA will also be releasing a report from the Blockchain Symposium in the near future, and I’ll link it here when it’s available

Dear Brian: Clearing Out Old Vendors, Customers, Items, and Accounts in Desktop QuickBooks

Dear Brian:

My client has been using QuickBooks Pro for well over 10 years.  They upgrade every few years however the file size is getting very large.  They do not want to switch to another program and do not want to switch to QuickBooks Online.

I was under the impression that the newest versions of QuickBooks allows you to purge old data or allows you to reduce the file size.

What should I do?

Sincerely,
Carl in Philadelphia


Dear Carl,

You may want to consider using the Condense Data feature in QuickBooks (File, Utilities, Condense Data from the menu)- it will let you remove the old data as well as the old list items – vendors, customers, accounts, etc. which you haven’t touched in years.

You can download a PDF file with directions on how to do this by filling out the form below:

The World Continues to Evolve. Will You?

I’ve been part of the CPA profession since I graduated from the University of Tennessee and joined one of the “Big Six” accounting firms in 1992.  I started during the waning days of working papers which were made of paper, and had the privilege of carrying a 40 pound Compaq “luggable” transportable PC as my first work computer shortly thereafter – so I’ve been around a while.  During the last 25 years, we’ve transitioned from paper to computer-based documentation, and have also seen the rise of the internet.  The changes we’ve seen – the rise and fall of Yahoo, Amazon’s domination and disruption of everything, and the rise of smart phones – are nothing short of breathtaking.  When viewed in the context of how we worked 40 years ago, it’s important to remember they didn’t change overnight – it took decades for things to shift to the new paradigm.

A two-sided

The late Roy Amara, a respected researcher, scientist, and futurist who led The Institute for the Future during the 1970’s and 1980’s, is credited with creating “Amara’s Law”.  His maxim states, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” If you think about the tools we use in our offices every day, almost none of the tools we used forty years ago are used today.  Gone are the paper rolodex cards, typewriters, 10-key adding machines, workpaper binders, 5-column paper, phone books, and colored pencils from the past, replaced by multiple monitors, printers, e-mail, and software like ProSystem fx Engagement.  An accountant from 1978 who visited a cloud-based accounting firm without a physical office wouldn’t recognize what he or she saw.  They would be shocked how simple tasks like payroll have been automated and centralized into computer data centers operated by ADP, Paychex, and Intuit which are accessed using the internet– they would be completely lost in today’s world.

We are all learning about emerging technologies like blockchain, artificial intelligence, machine learning, and process automation.  While most of these technologies are platforms for software developers instead of applications you can use to solve a specific business problem.  As I write this in the spring of 2018, there aren’t many ways I can utilize these technologies today – but I believe that they will impact how we work in the future in ways we can’t imagine.

It’s important to stay current on technology, but that doesn’t mean that you have to know everything about it – or as my friend Gary Boomer often says, “you don’t have to know how the movement mechanism in a wristwatch works in order to tell what time it is.”  The time to change your work processes is when it makes financial and operational sense to do so, not when “the cool kids” say it’s OK.  Keep up with your competitors and don’t get behind on technology– because there are a lot of dinosaurs with dusty offices full of paper who upon retirement will realize smaller gains when selling their practice because they didn’t keep up.

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