Blockchain: A 'significant evolution' accountants can't afford to ignore

Blockchain might be the most buzzworthy word in accounting today, if its prominence at the Accounting and Finance Show L.A. last week is any indication.

Multiple sessions covered the emerging technology, with one keynote speaker, Robert Massey, a partner at Deloitte, giving a primer on the hot topic.

“Blockchain is one of the most significant evolutions we’ve seen,” said Massey, who leads the Big Four firm’s cryptocurrency and blockchain practice globally. “Blockchain is to value as the internet is to information. It’s an exponential change, to share information between decentralized parties, in real time. It decentralizes the ability to record information, and enable transactions. It’s the next step in the evolution of commerce.”

Massey finds it helpful to think of blockchain as a “big shared ledger” -- more specifically, “a distributed ledger which allows digital assets to be transacted in real time, in an immutable manner.”

Smarter agreements

Members of another panel on blockchain focused more on how accountants should plan to harness the technology within their practices.

Practitioners should start with educating themselves on the blockchain, all panelists agreed. David Cieslak, chief cloud officer and executive vice president at business consulting firm RKL eSolutions, suggested that firms add a blockchain leader, while Ron Quaranta, chairman of the Wall Street Blockchain Alliance, recommended seeking resources on the topic from the American Institute of CPAs.

“Technology has disrupted the profession previously — this is not a new conversation,” said Danetha Doe, founder of financial mentorship program Money and Mimosas. “It’s the speed of the change. The next generation is adopting quickly, and you’re going to start to see a shift in the profession … how blockchain can be applied to different use cases outside the box.”

“All of us need to be thinking a lot more about value, and a lot less about tasks, [which] are often much more transactional,” said Cieslak. “Blockchain is really going to accelerate that. How can we leverage the technology to bring that greater value?”

It was a question asked frequently throughout the two days of the Accounting and Finance Show, with speakers attempting to provide guidance on a bold, and still mysterious, new frontier. But the technology’s novelty and unrealized potential only energized both panelists and attendees.

The conference’s thought leaders were most enthusiastic about blockchain as it related to new ways of conducting business, such as its use in smart contracts.

Smart contracts take “key terms in a legal agreement, and embed [them] in software, creating link dependencies in the agreements,” Massey explained in his keynote session. He offered the example of a farmer buying crop insurance, which will pay him if it doesn’t rain for 100 days.

Smart contracts utilize blockchain to connect to outside, trusted “sources of truth” to facilitate, enforce and verify terms of an agreement, thus removing the need for third parties or middlemen. In Massey’s farmer example, one of those sources of truth would be regional weather data.

“Blockchain is very effective connective tissue,” Massey explained. “We see, in all industries, the use of smart contracts enabling better relationships.”

Smart contracts “are happening organically anyway,” he continued. “It’s not just the systems, but the organizations that are decentralized. It’s likely now that transactions are validated somewhere other than where management is sitting.”

“There’s a real variety of use cases, and those are what are super-exciting,” said Cieslak during the panel discussion. “Some of what is going to be done with blockchain, has never been done before.”

The implications are especially exciting for certain industries, like the recording industry, an example many speakers cited when describing how intellectual property, like songwriting credits, can be coded into blockchain-enabled smart contracts. Speakers and panelists urged attendees to educate themselves on the technology and assess how it can apply to their clients and industry verticals.

“Every company innovation in this space is putting forth solutions,” said Massey. “In L.A., in entertainment, in media, [you can] lock down intangibles like the rights of a song or movie. What if you lock that down in a blockchain solution, before you had to pay for it? It’s a significant evolution in song and movie rights. It’s hitting every industry. It’s relevant to every single one of them. Think about your clients, and what’s relevant to them.”

Crypto, currently

Many people are familiar with blockchain as the technology behind cryptocurrencies like bitcoin and ethereum, and Deloitte's Massey dedicated a portion of his session to addressing those virtual currencies, as did other panelists at the conference.

All panelists stressed the status of cryptocurrency as property, based on guidance issued by the Internal Revenue Service in 2014.

Stephen Turanchik, an attorney in the tax practice at law firm Paul Hastings, spoke about the perplexing nature of cryptocurrency taxation during another conference session. He explained that virtual-currency exchanges are not required to report to the IRS, so “a lack of detection, and the ability to hide it, still exists.” But, he continued, “if you think that gives you the license to commit tax fraud, think again.”

On July 2 of this year, the IRS announced its virtual currency compliance campaign, and it will be conducting more audits on virtual currencies, Turanchik warned the audience.

The IRS is also stepping up outreach and education efforts, and soliciting taxpayer and practitioner feedback for these campaigns. The service is urging taxpayers with unreported virtual currency transactions to “correct their returns as soon as practical,” Turanchik reported, though the IRS is not contemplating voluntary disclosure programs.

“The IRS simply doesn’t have the technical expertise to give guidance in this area,” Turanchik said. He cited a “John Doe” summons the IRS served to virtual-currency exchange Coinbase in November 2016, seeking customer data. Before the petition was granted, the IRS had to narrow the scope of the summons, to Coinbase users with accounts of at least $20,000 in any one transaction type, in any single year between 2013-15.

Overall, Turanchik explained, there is a “significant lack of transparency” in the cryptocurrency space, which he said keeps him busy, and provides big opportunities for tax preparers.

Source: accountingtoday.com Written by: Danielle Lee

KPMG introduces Ignite, a portfolio of AI tools

During its Global Data and Analytics summit in Boston this week, Big Four firm KPMG launched a portfolio of artificial intelligence (AI) capabilities called Ignite. The AI tools are designed to enhance the decisions and processes that KPMG clients use to go digital.

“Artificial intelligence, combined with advanced data and analytics and robotic process automation (RPA) are enabling a new generation of intelligent automation that is changing the nature of work and quality of services,” said Cliff Justice, principal and leader of intelligent automation, KPMG in the U.S., in a statement. “KPMG Ignite will offer clients and our KPMG professionals some of the most advanced suite of AI tools, solution capabilities and accelerators, designed to move quickly and capture the most value in this era of exponential technology change.”

Earlier this year, the firm founded KPMG Ignition, a workspace in Midtown Manhattan that brings together its Innovation Lab, Insights Center and Technology Solutions. The space now has a dedicated Intelligent Automation Lab that uses certain tools and approaches to build AI solutions.

KPMG has built accelerators for Ignite in the form of patterns and tools to enable rapid AI solution development and delivery. These accelerators work by integrating with existing IT infrastructure without the need for developing new methodologies and templates.

KPMG Ignite also features a set of frameworks and methods that describe how KPMG professionals approach client-specific AI solutions and make them repeatable. The initiative will also provide ongoing testing, prototype development and innovation on emerging AI tools and approaches.

“The promise of AI requires more than just technology. Its power must be grounded on a foundation of trusted analytics, access to unique and reliable data, and deep-rooted domain knowledge in order to drive new insights and strategies,” added Brad Fisher, KPMG’s U.S. leader of data and analytics. “KPMG Ignite fills a critical void in the marketplace for businesses that aim to meet the competitive challenges of the future, particularly those who wish to expand and serve customers more efficiently.”

To learn more about KPMG Ignite, click here.

Source: Accounting Today

Do I need an Accountant?

As a small-business owner, up until this point, you may have managed your money successfully. Software programs like QuickBooks make it possible, even if you don’t have much financial knowledge or experience.

However, as your business — and revenue — grow, managing your financials may become a task you don’t have the time or knowledge to manage. Specifically, when it comes avoiding legal and compliance issues.

An accountant can talk to you in straight terms, weed through terminology, and teach you how to manage your own finances. In addition, you don’t want to miss key information or make mistakes early that could cost you down the road. An accountant can start you and your business off on the right track.

An accountant can advise you early on so that you can comply with all tax regulations. More importantly, an accountant can inform you of tax credits and deductions you can take, and predict the taxes you’ll owe.

Managing your books is preventing you from accomplishing tasks that could directly grow your business (for example, acquiring new clients or moving into new markets) or managing your business effectively (such as dealing with performance issues or troubleshooting service problems). Hire an accountant so you can focus on winning more business, innovating, building your team, and other development activities.

Accountants can create detailed, accurate reports that keep your investors happy and allow you to focus on tasks like growing the business. Additionally, if you are looking for a loan or funding from an investor, you will need to present a polished business plan. An accountant can help you flesh out the financial portion of your plan

If you want to grow through an acquisition, sell off parts of the business, or sell the entire business, an accountant can walk you through the process and determine how to structure the transaction so that you aren’t hit with overwhelming taxes.

Courtesy of QuickBooks

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting tips for Small Business

Keep it separate.
By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place.
Call in a pro.
An accountant will almost always find more deductions and keep you penalty-free.
Pencil it in.
Set aside about 15 minutes every week to organize your finances, and don’t let other things take priority during this time.  You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches.
Consider your people.
Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime and any other costs associated with labor. By tracking your spending on labor, perks and benefits, you may find you have more money to incentivize your employees — or that you’re outspending your budget.
Don’t forget to get paid.
If you’re not keeping proper records that you can make sense of at a glance, it could be months before you realize you have outstanding invoices. You could be collecting payments late, or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.

Courtesy of Forbes

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Avoid these 5 financial mistakes

Mistake #1: Getting A Late Start On Saving.
More than any other single error, I'd say this is the one that prevents people from attaining at least a measure of financial security. For example, in a recent survey of retirees by Pentegra Retirement Services 39% of those polled said they regretted not having started saving sooner, and 63% said the most important advice they could offer to people starting out would be to get an early start on saving.
The oldsters know what they're talking about. A 25-year-old earning $30,000 who saves 10% of salary a year would have a nest egg of just over $620,000 at 65, assuming 2% annual raises and a 6% annual return on investments. If that person holds off just five years, the size of the nest egg falls by almost $140,000. Waiting 10 years shrinks it by more than $250,000.

Mistake #2: Taking on unnecessary debt.
Sometimes it makes sense to borrow -- say, to buy a house, purchase a car or finance an education that can increase your earning power. But it's the debt we take on to maintain a lifestyle that exceeds our earning power that gets us in trouble.
And make no mistake, paying down debt can strain your budget. According to NerdWallet's latest annual survey on consumer debt, the average household is shelling out more than $6,650 in interest payments alone per year.

Mistake #3: Buying into Wall Street's 'investing is complicated' mantra.
The message investors get from many Wall Street firms boils down to this: You need to watch the financial markets constantly, spread your money among all sorts of arcane and complex investments and be ready at a moment's notice to dump what you own for new investments. And, of course, to pull off all this successfully, you need their help, for which you must pay a handsome price.
Nonsense. No one, not even market pros, can consistently outguess the financial markets. And research by University of California at Berkeley finance professor Terrance Odean shows that trying to do so by frequent trading is more likely to hurt than enhance your returns.

Mistake #4: Overpaying for financial help.
Whether it's the annual expenses you pay to a mutual fund manager or the fees you shell out to an adviser to help you choose the right funds and provide other financial advice, the fact is that paying more than you have to drags down the returns you earn and makes it harder for your savings to grow. Which is why it makes sense to hold the line on such costs as much as possible.
When it comes to investments, the easiest way to rein in expenses is to stick as much as possible to low-cost index funds and ETFs. Doing so can easily save you upwards of 1% a year compared with the typical stock mutual fund.

Mistake #5: Failing to monitor your progress.
You don't have to (and shouldn't) constantly obsess about money matters. But neither can you just set a course and then assume all will be fine going forward. You need to periodically review your finances -- say, once a year or so -- to ensure you're making headway.
The most comprehensive gauge of whether you're making progress is to track your net worth -- that is, the difference between the value of your assets and liabilities, or what you own vs. what you owe.

Courtesy of CNN

For more information contact Neikirk, Mahoney and Smith at 502-896-2999