Even though they’re still a relatively new concept in accounting, the importance of implementing a decentralized and distributed organization cannot be overstated. As we have seen with the rise of blockchain-based startups such as Bitcoin and Ethereum, it is not possible to have widespread adoption of digital currency without also having widespread adoption of digital ledger technologies. The same can be said for the increasing role that business process outsourcing (BPO) will play in our future economy. In this blog post, we take a look at how fractional CFO services will play a key role in enabling blockchain startup ecosystems like those that exist around Bitcoin or Ethereum—but also other more traditional start-ups—to grow into sustainable businesses that are able to provide their customers with greater transparency about their financials
What is a fractional CFO service?
A fractional CFO service is a financial outsourcing service that provides businesses with a small portion of their financial data in a secure and transparent manner. These services are often used by large enterprises seeking to cut costs by short-turnabout delivery of financial data to the location of the client’s choosing. Typically, these data are structured in a way that they are certain to be accurate at all times. Some fractional CFO services also provide APIs that make the data accessible to third-party applications. These services are often referred to as “fractional banking” or “fractional trust” services.
The importance of decentralized accounting
A decentralized accounting model is perhaps the single greatest advantage that fractional CFO services have to offer their customers. This is due to the fact that financial data is a highly decentralized and distributed phenomenon. It is stored, processed, and reported at different locations all over the world, making it extremely difficult for even the most skilled accountant to have accurate data throughout the organization. Unfortunately, this leads to significant inefficiencies throughout the financial management system. For example, a large enterprise may have a single accounting department that records the entire organization’s financial data. However, due to the centralized nature of the accounting system, the data is not distributed throughout the organization and is instead kept within the accounting department. This means that the company is not well-served by the accounting data, and as a result, there may be inaccuracies in the financial statements that are essential to investors and creditors to understand the company’s financial condition.
How fractional CFO services work
A fractional CFO service typically employs accounting software that is capable of performing a wide range of tasks. For example, the accounting software may handle the recording of all assets, liabilities, expenses, revenue, and cash flow for a company. The software may also allow for the generation of financial reports and datasets that are accessible via web-based client applications which are widely used by online bookkeeping services. In some cases, the software is capable of conducting in-depth analyses of historical data to provide insight into future cash flows. In other cases, the software is meant to be used as a business partner that assists organizations in managing their financials. Fractional CFO services may also employ an independent financial advisor that specializes in audit engagement and due diligence.
BPO and the Future of Accounting
As we have seen with the rise of blockchain-based startups such as Bitcoin and Ethereum, it is not possible to have widespread adoption of digital currency without also having widespread adoption of digital ledger technologies. The same can be said for the increasing role that business process outsourcing (BPO) will play in our future economy. BPO is a rapidly growing sector that is ushering in a new way of doing business for many businesses. BPO services are already being used to outsource data, documentation, and accounting functions. However, there is a great deal of potential for the BPO sector to support the growth of blockchain-based technologies.
A decentralized and distributed organization is the future of accounting. It is not only beneficial to the company as a whole but also to the customers who will be served by this type of organization. Digital currency cannot be widely adopted without also being widely adopted of digital ledger technologies, as we have seen with the rise of blockchain-based startups like Bitcoin and Ethereum. The same is true of the expanding role that business process outsourcing (BPO) will play in our economy in the future.