Everything You Need To Know About Bitcoin for Your Business
First things first, you need to identify the right person to get into this business with and figure out how you will convert your cash to Bitcoin.
When Bitcoin was first created, the intention was for it to be used for everyday transactions. Back then, you could order pizza with it. But right now, the value of Bitcoin has increased so much.
This has made many businesses open to the idea of accepting it for their venture. Unfortunately, Bitcoin is still a complicated subject. You have to look for the right payment partner and come up with a way to convert the cash.
This guide will take you through the pros and cons, and probably everything important you need to know before getting started with Bitcoin.
Advantages and disadvantages of Bitcoin in your business
- There are no charges for PCI compliance and chargebacks.
- Investors, especially crypto fanatics, will be drawn toward the business.
- Accepting bitcoin as a means of payment can bring more returns than you anticipated. This can happen when you hold the coin and sell it when the value increases.
- This is a market that keeps on changing in technology. Matching this energy is not an easy task.
- Cryptocurrencies are highly volatile and the idea of holding a coin to sell it later may not be as good as you think because the value might fall which could bring losses to your business.
- There are other complications such as taxes and calculating a customer’s profit.
How cryptocurrencies like Bitcoin operate in a business
For easier transactions, look for platforms such as Coinbase and PitPay which are crypto payment platforms. They provide other services like recording the payments and regulating the volatility of the coins by ensuring the exchange rates are locked.
Here’s how transactions at a crypto business would look like:
- A customer willing to use crypto is given a QR code.
- The QR code will provide details of where the payment should be addressed to. This works like an email address; the only difference is that the address generated by the QR code is only used once.
- The verification process is done when the customer enters their private key which acts as a password.
- The recipient is allowed to choose in which form to accept the payment either in dollars or crypto.
Things to bear in mind before choosing Bitcoin and any other cryptocurrency
Figure out the type of crypto you will work with
Currently, there exist so many cryptocurrencies. The challenge is selecting the right one that uses crypto payment tools. The most common of all is Bitcoin which is mainly accepted everywhere.
Other popular coins such as Mooncoin and Alice might give you a challenge or two while using them.
Tax challenges you might face and how to deal with them
If you are thinking of accepting Bitcoin for your business, you should first talk to a financial advisor. They are in a better position to advise you on whether venturing into it is a risk worth undertaking or not.
The other thing to note is the countless tax implications you might be subjected to especially if you are planning to hold acquired crypto.
Also, the information being passed to your accountant has to be correct. For instance, if you are using a cloud-based system such as Xero and QuickBooks, ensure that the tools can merge to achieve a certain goal.
Come up with a clear plan on how to pay your customers for the capital gain taxes acquired. Though this may not directly affect you, it is good for you to weigh the payment options.
Is it necessary to change the payments to cash? And if so, how can you do that?
Converting the crypto to cash can have an impact on your business. Ask yourself this, is holding the crypto in your best interest? After receiving the crypto, is converting it necessary? Should converting the cash be regular? The important thing is to ensure the business does not register losses in the process.
How does crypto affect the running of your business?
Although many tools and companies help crypto with payments and monitoring price volatility, there is still a lot you need to keep in mind.
Don Apgar, a director at Mercator Advisory Group, which deals with payments had this to say “there is no direct cost to you” he went further to explain that a business owner will incur a cost that will appear in the form of training customer service, and reformatting a report. He conveyed this question “what happens when a person wants to return, what about disputes?” According to him, there should not be time wastage.
Here are some of the questions you need to have an answer to before getting started on this whole crypto business:
- Do the staff need training? And if yes, what kind?
- Are you well equipped to answer all the customer’s questions?
- Are there other factors in customer service that need to be addressed such as providing refunds?
- How should you deal with payments regarding the current inventory?
Comparing Crypto and Credit cards
There are many differences between credit cards and crypto. However, the two have noticeable similarities. One of the similarities is, it gives room for their users to pay for items electronically. Which is especially important for online users.
Let’s look that each of them closely to see where the similarities and differences come in:
|Payment method||Here the payments can operate without payment tools.||The payments have to pass through payment tools.|
|Fees||If the payment is done by the customer there are zero charges. But if done using a payment tool, the charges can be 1%.||Though every processor has its charge rate. The standard rate is 2.9%.|
|Security and safety||Not responsible for tax compliance and fraud.||In case of fraud and issues to do with compliance, the credit card is compliant.|
|Handling customer issues||For a business owner, there are no legal protections that they need to manage. You only need to be clear on your guidelines.||Here the card’s owners are responsible for all the decisions. But in most cases, the decisions favor the customer.|
|Settling of payment||The payments are settled fast. However, they are highly volatile.||Settlements are slow but stable.|
|Regulatory bodies||Currently, business owners don’t have to deal with regulatory bodies.||There are rules which have to be adhered to which make this method stable.|
Companies offering Crypto payments
How it copes with volatility:
- When a customer uses this site, It compares the rates of other exchange platforms and picks the most competitive rate. It does not charge for any markup. Also, the exchange rate picked for the customer will run for 15 minutes.
- Settlements made to the cryptocurrency used in transactions, the amount deposited will be equal to the amount the customer will receive as per stated in the rules of the cryptocurrency. For example, payments made in US dollars will be deposited as per the value of the original price of the dollar. But the 1% fee will be deducted.
There are a total of 13 cryptocurrencies and tokens supported by BitPay.
Apart from its very own point-of-sale app, BitPay has partnered with Verifone which gives its users the option of paying with crypto as well as paying with a card. This service has made using the platform easier, especially for its customers.
How it copes with volatility:
When a customer begins the checkout process, the exchange rate automatically locks itself. A merchant however can change the time the price was locked. This platform only accepts seven cryptocurrencies.
Coinbase has partnered with Shopify and WooCommerce to expand service delivery. In addition, it has two accounts that are similar in price but different in other areas. The two accounts are:
- Creating this account is simple.
- Payments made through cryptocurrencies are deposited in your wallets. This way it is easy to control it.
- If you are thinking of converting your crypto to US dollars, create a Coinbase Exchange account, transfer your crypto to that account, then sell them on that exchange.
- Here your wallet and private keys (passwords) are controlled by Coinbase.
- Having these accounts means transferring money to your bank account is easy.
- Many cryptocurrencies, if not all, can be converted to US dollars and other currencies.
- It is subjected to a compliance review that could take more than a month to be completed.
Another site worth mentioning is PayPal which gives shoppers the option of paying using cryptocurrencies. One unique thing about PayPal is it does not give merchants the option of accepting or denying being paid through crypto.
If a user feels the need to pay using crypto, they do so without any trouble. The merchant receives the payment in US dollars.
Although this option does not directly affect the merchant, it is good for your customers to feel that they have various payment options.