Finance — like virtually every other business process over the last few years — has been transformed and defined by advancing technology. Now, the systems for tracking financial data and auditing ledgers are more comprehensive and available than ever before.
This tech-powered, accessible fintech marketplace has led to the creation of an expansive and powerful alternative finance sector. This is a whole new field that entails all kinds of considerations for professional accountants — no matter how and where they work.
So as the nature of finance transforms, accountants must explore the changes and what it means to them. You can start by understanding what alternative financing is and how it is making a difference in the accounting world.
What is Alternative Finance?
When we talk about alternative finance, what we mean are the firms, providers, and lenders that work outside traditional banks and services to provide out-of-the-box solutions. These financiers would be hard-pressed to do what they do without fintech and the democratizing solutions it enables. These are some of the activities common to alternative financing:
Alternative finance is all about changing the way we manage money to provide equitable and helpful solutions for consumers. The means taking finance and accounting where they are currently underrepresented and utilized. Crowdfunding, for instance, is stepping in to provide healthcare solutions for individuals while online lending options give new businesses convenient funding choices.
But among all the alternative finance tools, cryptocurrencies have uniquely transformed the capabilities of alternative finance. Suddenly, new solutions for micro, decentralized, and peer lending are possible through the advantages of a decentralized system of financial exchanges. Cryptocurrency is reshaping alternative finance, which is, in turn, reshaping the accounting profession.
Cryptocurrency is made possible through blockchain technology. This helpful tool simplifies international trade with seamless transactions that need no payment processor. Instead, transaction data is recorded on an immutable data node linked in a cryptographic chain. The result is a safe and transparent system of financial management.
Blockchain carries powerful implications for alternative finance and the accountants who interact with it. With blockchain, alternative finance solutions can carry consumers even further. This means new opportunities and work processes for accountants all over the world.
How Alternative Finance is Changing the Field of Accounting
Accounting is a hard job. Accountants face the trouble and tedium of tracking, checking, and analyzing all kinds of financial data as businesses conduct business in a global and highly digital economy. To fill all the needs of consumers within this economy, accountants must use fintech and alternative finance to provide new solutions.
Fortunately, the rapidly evolving nature of alternative finance makes this easier. However, the trade-off means changes in the ways accountants work. These are the ways alternative finance is transforming the field of accounting:
There are myriad steps and control factors when it comes to assessing digital accounts, assets, and opportunities. Alternative finance streamlines the way accountants work by providing options for automating some of the most tedious and complex aspects of the job.
For example, tracking the cost basis and adjusted cost can be exceptionally difficult as you navigate cryptocurrency transactions alongside a host of other currencies and assets. This situation all but demands the integration of automation into the accounting workflow.
With AI-powered assistance, accountants are tracking everything from accounts payable to tax filing requirements as they differ over states, countries, and situations. The data then goes into comprehensive, cloud-based management software for easy access by the accountant.
Greater Clarity and Accuracy
Clarity and accuracy are the big focuses of alternative finance and accounting. Tools like blockchain are making it easier to immutably track data and automate systems to avoid confusion and discrepancies.
Perhaps the most powerful of these changes is the use of triple-entry accounting. Triple-entry accounting adds blockchain to the ledger system, linking two sides of a transaction with an unchangeable record of the transaction stored in its own decentralized node. From there, both parties can automatically validate their own ledgers for greater accuracy and clarity.
A Renewed Focus on Communication
Alternative finance means providing solutions for the unbanked and underserved, and that necessitates accountants approach their work with a certain set of skills. Most important is their ability to communicate clearly and effectively across cultures and systems. To maintain the clarity needed across disparate financial systems and currencies, accountants have to focus harder on communication.
Because of the borderless nature of alternative finance, accountants will find themselves dealing with all kinds of clients. Intercultural communication is more important than ever in such an environment. Accountants have to avoid communication roadblocks like language barriers or assumed similarities to more accurately provide client solutions.
These are but a few of the transformations becoming commonplace to the field of accounting as alternative finance moves more into the mainstream. With the power of fintech and the right skills, accountants are seizing opportunities in the future of finance.
Fintech and the Future of Finance
As the world shifts into more borderless finance practices, the need for alternative finance accountants will only grow. COVID-19 accelerated the transformation that was already happening. Now, accountants must use automation, clarity, and communication with the help of powerful fintech tools if they want to make the most of the new economy.
For fintech and the future of finance, this means embracing alternative options and systems to produce more efficient results.