Crypto Accounting Practices
Ah, cryptocurrency bookkeeping. The mysterious and elusive task that leaves many business owners scratching their heads. The internet is no help either. Search “how to do accounting” or “best practices for crypto bookkeeping” and you’ll find yourself in a deep void of nothingness. It’s like looking for a needle in a haystack!
Unlike traditional accounting where there are plenty of resources, accounting is new and evolving, and guidance is limited. But fear not! We’re here to shed some light on the topic and make it less scary.
Why is proper cryptocurrency bookkeeping essential for your business? Well, for starters, it helps you track your business performance. You’ll be able to monitor your crypto revenue, expenses, and equity, which is vital to identify areas for improvement. Secondly, proper bookkeeping ensures that transactions are classified correctly, so you don’t accidentally overpay on your taxes. Don’t make the mistake of tagging a transfer between wallets as a sale of assets — that’s a recipe for disaster! Lastly, proper bookkeeping makes it easier for your business to pass an audit, whether it’s from the IRS or your investors.
Here are our top five tips to get you started:
Sorry QuickBooks, Xero, and NetSuite, you’re not cut out for crypto accounting. These legacy systems are excellent at handling fiat transactions that run through financial institutions, but not so much when it comes to blockchains. That’s where crypto accounting software comes in. These programs can pull data from the blockchain and do the transaction costing for you. It’s like having a personal assistant for your accounting needs! Just remember to verify and cross-check the reporting.
Wallet hygiene? Sounds fancy! All it means is having your wallets structured properly. Use separate wallets for distinct purposes, like one for NFT sales and another for paying contractors. Mixing business and personal transactions is a big no-no! Having single-use wallets ensures a clean audit trail and keeps your accounting team happy.
Here’s an 3D image rendered by OpenAI’s DALL-E2 of a Crypto Accountant with Bitcoin on Mars!
Don’t let “the infamous forgotten wallet” happen to you! Keep a record of your wallets, and download all of your transactions before closing any accounts. A good accounting team can sometimes identify missing wallets, but why risk it? Better safe than sorry!
iv. Set Yourself Up For Success
Don’t be that person who procrastinates until the end of the year to do their bookkeeping. It’s a recipe for disaster! Stay on top of it throughout the year, and your accounting team will thank you. Once your processes are in place — the rest of the year will be a breeze. Organization is key here!
v. Reach Out to an Expert
When all else fails, don’t be afraid to reach out to an expert in the field. It’s better to ask for help than to mess up your bookkeeping and regret it later.
See? Cryptocurrency bookkeeping doesn’t have to be scary or complicated. With these tips, you’ll be a pro in no time!
Our team over at OnChain Accounting is here to answer any questions you may have. Feel free to shoot us a message on Telegram or Schedule a call through our site: OnChainAccounting.com!!