Cryptocurrency Accounting for Small Businesses: How It Can Help Your Business
Is “cryptocurrency,” one of those terms that you’ve heard but you’re not really sure what it is? Is it real money or something that only exists on paper?
We’re here to tell you that yes, it is real, and it is something that’s becoming more popular with small businesses. But learning how to integrate it can be overwhelming, especially when you need to work on your finances. After reading this blog, you will better understand the benefits of cryptocurrency, how it’s being leveraged in different industries, and why you should use a professional for your business’ cryptocurrency accounting.
What is Cryptocurrency?
Cryptocurrency is a class of digital assets created using cryptographic techniques that allow people to buy, sell, or trade them securely. It is not regulated by any authority entity like a central bank or the government. Customers can use it like any other currency if a business is set up to accept it.
Some common types of cryptocurrency are:
- USD Coin
What Are the Benefits of Using Cryptocurrency?
Cryptocurrency can be difficult to understand at first, especially if you’re just getting started with it. However, there are some benefits for your business.
- It can reduce transaction costs.
Businesses are charged a fee when people use a credit card. Accepting cryptocurrency can reduce those transaction processing costs if you accept it as payment.
- It can safeguard your company from excessive chargebacks.
A chargeback is the payment amount that is returned to a debit or credit card after a customer disputes the transaction or simply returns the purchased item. Merchants typically incur a fee from the card issuer when a chargeback occurs. Using cryptocurrency is a way merchants protect themselves against chargebacks.
In cryptocurrency transfers, the funds are placed in escrow until the transaction is confirmed by both parties. Once the transaction is complete, there is typically no way to reverse it. This can help prevent fraud because people won’t be able to dispute charges and collect the money.
- It can help you cater to your audience.
With the rise of Venmo and other electronic payment apps, many younger people don’t carry cash or use cards anymore. The majority of people who use cryptocurrency are between ages 18-40. So if that is your target demographic, using crypto as the preferred payment method would be a wise choice.
If you initially set up your business to accept crypto payments, you won’t have to take the time later on and potentially lose money.
Risks to Keep in Mind
While there are many benefits to using cryptocurrency, there are a few risks to consider:
- Since this is a newer form of currency, it hasn’t been widely adopted yet.
- The market fluctuates and isn’t as stable as a traditional currency market. (Prices won’t be as stable and can change not only from day to day but from hour to hour.)
- It can be harder to convert into actual currency since it isn’t regulated.
- While it isn’t regulated now, that doesn’t mean that it can’t be regulated in the future and those changes would affect the market or how cryptocurrencies work.
- It can be harder to be transparent with investors about finances since they might not understand cryptocurrency and what is involved.
- Since it is technology-based, it can be hacked if you don’t have the correct security measures. And if hacked, it will be harder to get the money back since cryptocurrencies aren’t insured.
- Consequently, if a company declares bankruptcy, then it can be almost impossible to recoup your money. For example, when FTX, a cryptocurrency trading company, declared bankruptcy, around $1 billion of client funds went missing.
Why Cryptocurrency Works Well in Different Industries
To show how you can incorporate cryptocurrency into your business, here are two examples from some of the fastest-growing industries that benefit the most from its flexibility.
Despite being legal in a growing number of states for either medical or recreational use, cannabis is still illegal under federal law. The resulting regulatory uncertainty has effectively locked the industry out of the traditional financial system.
A lot of cannabis businesses aren’t able to secure funding due to traditional banking systems believing in the stigma still on the cannabis industry. Or, if banks do make the loan or allow a business to have an account, they can charge outrageous fees.
Cryptocurrency allows cannabis businesses to easily secure funding. They can open a crypto account for their business and get started quicker than going through the traditional methods.
Using cryptocurrency within the business can also help the cannabis industry reach its younger demographic clients since they are the most likely to use it for payment.
It’s not a perfect solution since there are still some risks; however, many cannabis companies have found it useful.
Life sciences is a complex, fast-paced industry where companies must balance accounting and financial reporting with internal control requirements. It encompasses pharmaceuticals, biotech, and medical device manufacturing.
Blockchain came into the public’s knowledge as the foundation of Bitcoin. Basically, a blockchain is a real-time list of electronic records, with each block unit containing a timestamp, information about the previous block in the chain, and data.
In the life sciences industry, blockchain has the potential to:
- Enhance cross-industry partnerships.
- Tracking tangible and intangible entities in many service and/or product channels.
Using cryptocurrency and blockchain can make it easier for different industries that don’t work together to begin working together. Both parties will need to communicate before any deals are made and after the deal is done, there will be a record of the transaction.
Why Use an Outsourced Accounting Service for Cryptocurrency?
Now that you’ve heard about the benefits of using cryptocurrency for your small business, here are the “whys” of using Powered by Centri to help with your cryptocurrency accounting.
- You’ll gain our expert knowledge.
If you’re new to cryptocurrency, it can be overwhelming. Let your dedicated point person work with you to help avoid any rookie mistakes.
- We can help you keep up with regulations.
Since the laws and regulations aren’t established, it is good to have an expert who knows to look for any updates to the laws and can help keep your business on track. That way when new crypto regulations are released, you are already prepared and can start complying.
- We know how to report cryptocurrency payments on financial statements.
You know you have payments but since it wasn’t on credit or cash, you might not know how to show this transaction on your statements.
- You can get accurate, real-time data.
Powered by Centri uses a powerful suite of innovative, user-friendly software that allows you to view your full portfolio in almost real-time. Your financial data will be available anytime you need to make any decisions for your business.