If you’re using QuickBooks and crypto is now part of your accounting processes, you’re probably wondering:
In this guide, we’ll answer all these questions and provide a handful of options to make the process easier.
First, QuickBooks does not natively support cryptocurrency. So if your business now handles crypto, you’ll either have to perform calculations manually or purchase a crypto add-on tool.
If you only have a few crypto transactions monthly, you might be able to perform the necessary calculations by hand and manually add the data to the general ledger.
The main calculations involved with crypto accounting are cost basis and the gain or loss of the transaction.
The cost basis for each transaction is the price you purchase the coin for plus any transaction fees (such as the fee to move it to your wallet).
Then, if you sell or trade the coin(s), you’ll also have to calculate the gain or loss (ideally using the FIFO method) and create a corresponding journal entry.
While manually accounting for crypto isn’t too difficult if you only have a handful of monthly transactions, it can quickly get out of hand if you have tens, hundreds, or even thousands of transactions per month.
In addition, the IRS released a statement in 2014 that all “virtual currencies” are now taxed as property. So if you don’t have excellent records and accurate cryptocurrency accounting processes, you’ll probably find yourself in trouble with the IRS.
That’s why most companies prefer to purchase a crypto add-on tool that integrates with QuickBooks.
Some of the popular QuickBooks crypto add-on tools include:
Once you’ve purchased the add-on, you’ll have to connect it to your QuickBooks account. Once connected you will need to import your crypto transactions from the add-on tool into the general ledger every month.
Constantly importing and exporting data can be cumbersome, and you’ll never have a consolidated view of your financial data as the crypto and fiat data are only combined at the end of the month. This is a problem for companies with a significant portion of revenue/expenses in crypto, as they never have an accurate picture of their financial status throughout the month.
In addition, most crypto transactions involve at least eight decimal places. So if QuickBooks doesn’t natively offer the coin you’re recording (such as Bitcoin or Ether), you might have to record the coin as a foreign currency (such as the Zimbabwe dollar) that does support the required decimal places. This adds another level of complexity to the accounting process and slows down the financial close process.
So while using an add-on is better than manually calculating crypto transactions, QuickBooks, in general, isn’t really set up to handle crypto accounting.
For that reason, you might want to consider using native crypto accounting software. One that seamlessly integrates your fiat accounting with your crypto accounting.
We were frustrated that there wasn’t a single general ledger accounting software that seamlessly integrated fiat and crypto financial data in one general ledger without using an add-on. To solve this problem, we built SoftLedger!
SoftLedger is the first crypto-native accounting software that seamlessly integrates your fiat and crypto financial data, and automatically handles the nuanced challenges of crypto accounting.
Here are a few key benefits of using a crypto-native solution like SoftLedger.
The main benefit of SoftLedger is that it does all of the calculations for you (without ever importing or exporting crypto data to an add-on tool).
Specifically, SoftLedger automatically:
Here’s a brief walkthrough of the SoftLedger crypto module:
So within a few seconds of a new crypto transaction entering the system, SoftLedger completes all of the above calculations and the general ledger automatically adjusts to reflect the new transaction.
In addition, as all of the calculations are automatic, there’s always a clear audit trail. As a result, you never have to worry about manual errors creeping into your data.
We also know that cryptocurrencies will continue to evolve, so we built SoftLedger to be as flexible as possible.
First, we support all exchange-traded coins and tokens. In fact, even if your coin isn’t, you can enter a custom coin.
A key problem with QuickBooks is that they only support a handful of coins. So if QuickBooks doesn’t support your coin, you’ll likely have to record it as a foreign currency to accommodate the necessary decimal places.
In addition, SoftLedger has an open API, making it easy to build any custom integrations or add additional customizations.
Finally, a key differentiator between SoftLedger and other solutions is that you’ll always have access to real-time data in the general ledger.
The instant a new transaction enters the system, SoftLedger performs all necessary calculations automatically and adjusts the general ledger to reflect the new transaction.
With a consolidated general ledger updated in real-time, you’ll be able to make smarter financial decisions throughout the month. Additionally, you’ll never have to guess how much you’ve spent thus far during the month.
In addition, you’ll be able to close the books at the end of the month in minutes because the general ledger always offers an up-to-date view.
If you’re performing more than a handful of crypto transactions monthly, consider using a crypto-native solution like SoftLedger. While it’s not impossible to account for cryptocurrencies within QuickBooks, you’ll probably have to purchase a crypto add-on.
Even with an add-on, QuickBooks is designed for small businesses and therefore isn’t supposed to be flexible.
So you’ll probably run into nuanced challenges, such as unsupported coins, and you won’t be able to build custom integrations.
To learn more about SoftLedger and see how it can simplify your crypto accounting processes, schedule a demo today.