Cryptocurrency and blockchain technology have dominated the tech conversation in 2019. Experts in the finance industry are learning all they can about how crypto works and what to expect from different blockchains and altcoins. Everywhere you look, people are clamoring for more crypto knowledge, but all that noise has muffled the people who keep everything running.
After the crypto boom in 2017, accountants were overwhelmed by a wave of crypto-owning clients who needed to know what to do with their new assets. People wanted answers, but CPAs could only offer educated guesses. Since then, crypto’s role in the financial landscape has grown, yet many accountants remain just as uncertain about how to handle crypto investments as they were in 2017.
As intimidating as crypto may appear, accountants don’t need to study blockchain development in order to manage crypto assets. Since co-founding my crypto management company, I have seen how developing a foundational system for organizing accounting practices can set apart businesses when it comes to crypto. Follow these three crypto accounting best practices to stay ahead of the curve:
Keep tabs on compliance, taxation and regulation.
You can’t follow the rules if you don’t know what the rules are. Stay up to date on news and trends for compliance, taxation, and legal regulation in cryptocurrency markets. Federal and local laws may differ, so you might need to toe different lines depending on where you operate.
Set up Google Alerts for phrases like “crypto accounting,” “crypto tax,” “crypto law” and “crypto compliance.” These alerts will ensure you always have the latest information on your chosen topics. Create alerts for your state as well, so you never miss a big local change.
To provide context on your crypto updates, follow top outlets for cryptocurrency news. CoinDesk, CoinTelegraph, Forbes, Business Insider, CNBC Crypto, The New York Times, and The Wall Street Journal all cover crypto in greater detail.
It’s also valuable to consider joining new professional organizations like the Accounting Blockchain Coalition. The more you speak with other leaders and experts in the industry, the better prepared you will be to deal with changes in the crypto world. Staying on top of current events and thinking about the implications in your industry so proactive preparation can be made can also be beneficial.
Organize your accounts, portfolios and assets.
Once you create a network of sources to keep you informed, what do you plan to do with that information? Get your affairs in order to make it easy to add crypto to any existing accounts.
Create a chart of accounts to catalog all of your assets and portfolios. Develop an organizational structure that divides clients into separate portfolios. Each portfolio should address different accounts, blockchains and exchanges. This setup may initially take some time to develop, but an efficient workflow will help you stay organized in the face of major crypto disruption and evolution in legal, compliance and more.
Crypto accounting can quickly turn into a messy web of complex information. If you don’t get organized, you won’t know how to interpret or sort new data as it comes along. With smart categorization techniques, you can dramatically improve your operational efficiency and avoid costly errors.
Business customers often make thousands of transactions. As more of those transactions become crypto transactions, you’ll need to come up with smarter ways to organize and monitor the information they contain. Avoid the crypto growing pains and consider investing in the organizational infrastructure before tackling the unknown.
Automate for efficiency and accuracy.
Accountants, bookkeepers and finance professionals can no longer manually input information for every transaction and account. The modern world moves too quickly, and crypto — where volatile swings in value are common — moves even faster.
Lean on new technologies and tools to work faster and maintain a higher degree of accuracy. Instead of exporting to Excel or QuickBooks for every transaction, consider using automated software to tap into the API of the more popular coins, wallets and exchanges. Smart software can aggregate and label the information you need, saving countless man-hours and reducing opportunities for human error.
When it comes to software implementation, the sooner, the better is the philosophy. Productivity boosts are cumulative, and the longer you go without tools that protect you from errors and streamline your operations, the riskier your crypto accounting practices become. Accountants must offer irrefutable accuracy to maintain their value and reputations, so don’t skip the necessity of good software.
Spreadsheets alone cannot handle the crypto revolution. You can keep your spreadsheets for organizational purposes, but don’t rely on them for calculation and organization. If you do, it can lead to costly, hard-to-fix mistakes.
Cryptocurrencies have introduced more complexity into the accounting world, and the effects are just beginning. As the markets settle and new coins find new niches, more people will join the crypto revolution — and accountants must keep track of it all.