How to accept Bitcoin, for petite businesses – Bitcoin Wiki

How to accept Bitcoin, for puny businesses

It has been suggested that this article is merged with Merchant Howto.

This guide is intended for petite business owners who wish to help promote Bitcoin by accepting it as payment for goods and services. It’s written with the assumption that you operate a regular business that sells goods or services for regular national currency such as dollars, and that you wish to accept Bitcoin as another legal way to pay, and that you intend to pay taxes on your Bitcoin income just like any other income.

With Bitcoin being touted as a way to conduct anonymous transactions and as way to challenge with government currency, many petite business owners wonder what’s the right way to accept and account Bitcoin, or if it’s legal or ethical, or whether and how they should pay taxes on income received through Bitcoin.

Bitcoin has been formally recognized by some governments and authorities as a “currency”, but in practice, Bitcoin is no different than accepting payment in other forms such as cash or gold or scrip or bounty cards or foreign currency. We think that it is pretty much the same as the local businesses of Good Barrington, Massachusetts choosing to accept their locally-printed “Berkshire Bucks” to support their local economy.

Contents

Beginning to accept Bitcoin for transactions

Accepting Bitcoin at a petite business is best commenced in whichever manner keeps the accounting ordinary for you. This will vary by the type of business you are operating.

Begin with a sign

If you expect that the number of people interested in using Bitcoin is petite, you might simply commence by posting a sign or a note: “We Accept Bitcoin”, and ask people to contact you directly in order to make a payment. Even if hardly anybody uses Bitcoin as a payment method, you’re helping Bitcoin in two ways: one, by enhancing awareness, and two, by making your customers more willing to accept Bitcoin as payment from others in the future, because now they know somewhere they can spend it.

Accepting Payment

If you sell things in a brick and mortar shop, customers can pay using hardware terminals, touch screen apps or elementary wallet addresses through QR Codes.

For an online website, accepting Bitcoin should be implemented by a competent programmer and you should run a total knot, especially if you sell larger-ticket items.

Brainy Phone or Tablet

You can use a dedicated app or webapp that generates a QR code on the fly including the amount. Many wallets directly support QR code scanning for payment.

Accounting

When a customer makes a payment, you might simply issue a credit to their account. Ideally, you want to come in it in a way that suggests you received a payment. If on the other palm, you’re providing “discounts” for Bitcoins, but then you are selling the Bitcoins for currency and then counting that as income, then chances are good that your calculation of income is making up for it. Ask your accountant.

Businesses that suggest bounty cards

If your business sells bounty cards or bounty certificates, you may find that the easiest way to accept Bitcoin is to accept it only for the purchase of bounty cards, and then require the bounty cards to be used for actual purchases of goods or services. This way, the accounting practices you already have in place for processing bounty cards can be put to use. The accounting for Bitcoins would then be minimized to tracking sales of a single SKU.

This method is also ideal for retail food establishments and convenience stores, where the payment of Bitcoins through a mobile phone for a petite daily food purchase might be cumbersome or disruptive, especially in front of a line of other customers. Bitcoins in this case would be best used to reload prepaid cards that can then be swiped at point-of-sale.

If you don’t accept bounty cards, but you already accept credit cards through a swipe terminal, consider the possibility that you could add a retail bounty card system through the swipe terminal you already own. Many point-of-sale terminals, including ones from VeriFone®, are designed around the capability to support numerous applications on the same terminal. Bounty cards are also very profitable because of “breakage”, or in other words, the fact that a significant percentage of them never get redeemed.

You could consider adding a private label bounty card program from a provider who specializes in this, not just as a jumpstart to accepting Bitcoins, but as an extra boost to income. A private label bounty card service provider necessarily have to treat your funds – they can simply provide a solution that keeps track of the balance on the cards on your behalf, including features that permit users to check their balances by phone or by web. Such a solution, of course, is also what makes the cards swipeable through the card reader.

Businesses that mail invoices

Does your business send out invoices to customers? Adding one line may make a phat influence for the Bitcoin economy. Perhaps you list it as a payment option just after Visa, MasterCard, and American Express, even if that means your customer must call or e-mail to make a payment.

If you have access to the programming expertise such that you can generate Bitcoin addresses programmatically, consider generating a brand fresh Bitcoin address for each invoice, and print it on the invoice. When a Bitcoin payment arrives, you’ll automatically know where it should arrive.

Customers might wonder how much BTC they should pay in order to please an invoice in utter. Your invoice should suggest an amount.

You might be able to anticipate the possibility that even however a Bitcoin address can be printed on an invoice or payment stub, that they are very cumbersome for most people to type, especially being a mix of uppercase and lowercase letters. However, you should very likely still do it anyway. The customer is very likely going to want some paper trail for his payment. Providing him a pre-printed payment stub with a pre-printed address will please that, because the customer can independently and publicly prove through Block Explorer that the payment took place.

Does your business have a website? On your invoice, consider permitting them to go to a special URL to get the address to make a Bitcoin payment just by typing in their invoice number. This way, they can see the Bitcoin address, copy and paste it directly into their Bitcoin client.

Use a brand fresh address for each invoice whenever possible, and use it only once. This benefits the customer as it eliminates any ambiguity as to which customer is making which payment and for which invoice.

Avoiding fraud

You should also consider the possible risk that fraudsters could send counterfeit invoices to your customers, and entice them to make a payment to a Bitcoin address they control, instead of you. While that isn’t likely in general – it depends on how well a fraudster could find out who your customers are in the very first place – it would certainly be an unpleasant situation if it ever happened. One way you could control that is, whenever possible, never let people attempt to type Bitcoin addresses off payment stubs – instead, force people to get the utter Bitcoin address from your website via secure SSL. But, still print most of the address on the payment stub (perhaps with four or five characters starred out), so that the customer’s need for a paper trail can be sated, so they can prove they paid if there is ever a dispute. Merchants can also use the IP address geolocation to understand the close proximity of users. There is automated solution such as FraudLabs Pro that automates the screening of Bitcoin transactions to determine risk level.

Setting Prices

When a business accepts bitcoins for payment, there generally is the need to convert them to the currencies used for paying suppliers, employees and shareholders. Some merchants set prices based on the current market rate at the time the price quote is introduced to the customer

Bitcoin Prices lists the exchange rate for many currencies on numerous exchanges.

When prices are determined using an automated process, the current market rate can be based on either a current price or on a weighted average basis.

When bitcoin funds for purchases are received, some merchants instantly exchange those proceeds into the preferred currency used. Hedging for each transaction can almost entirely eliminate exchange rate risk that the business is exposed to when accepting bitcoins for payment.

Contract

A sales contract might be used to ensure that specific terms are met to lessen the chances of a misunderstanding. For example, the party sending payment is responsible for paying any transaction fee that might be necessary. A contract might specify that a transaction fee must be paid and what amount, so as to prevent the situation where the transaction is considered a low priority transaction and thus isn’t confirmed quickly.

Other items that might be addressed in a contract:

  • Requirement and treating of escrow through an escrow service.
  • Jurisdiction for disputes.
  • Refund policy (particularly with the exchange rate being volatile)

Paying taxes on Bitcoin income

Tax compliance is a topic of concern for puny businesses. We aren’t accountants or lawyers, and can’t give legal or accounting advice.

But in many respects, Bitcoin transactions work very much like cash. Just like Bitcoin, cash is anonymous and doesn’t leave a paper trail, yet is widely used in commerce every day.

Ask yourself how you would treat a cash transaction. Do you accept cash transactions? Do you normally pay taxes on cash transactions? The response for Bitcoin should most likely be the same.

As for how to determine what a Bitcoin transaction is worth: the IRS, as far as we know, has never issued a guide mentioning how to value Bitcoin transactions. But they have rules and guidelines on how to value transactions made in foreign currency or “cash equivalents”. We imagine the accounting would be similar.

With Bitcoins, there’s likely to be some difference inbetween the value of BTC when you received them as payment, versus when you go to exchange them for another currency like USD, should you determine to do so. This script, likewise, would be no different if you accepted foreign currency or gold as payment. Under some screenplays, it might make sense to book the dollar value of BTC income as it is received, and then to book any difference incurred when it is exchanged for fiat currency. Under others, it might make sense to book the entire thing at the time of exchange.

Perhaps you might talk to your accountant. You don’t need to get into a discussion with your accountant about block chains and private keys or the philosophy behind a decentralized currency. By comparing the fundamentals of Bitcoins to accounting concepts already well understood by the public, you can most likely get all the answers you need. What would you ask your accountant if you determined that you desired to accept Berkshire Bucks or 1-ounce gold coins as payment?

How to accept Bitcoin, for petite businesses – Bitcoin Wiki

How to accept Bitcoin, for petite businesses

It has been suggested that this article is merged with Merchant Howto.

This guide is intended for puny business owners who wish to help promote Bitcoin by accepting it as payment for goods and services. It’s written with the assumption that you operate a regular business that sells goods or services for regular national currency such as dollars, and that you wish to accept Bitcoin as another legal way to pay, and that you intend to pay taxes on your Bitcoin income just like any other income.

With Bitcoin being touted as a way to conduct anonymous transactions and as way to contest with government currency, many petite business owners wonder what’s the right way to accept and account Bitcoin, or if it’s legal or ethical, or whether and how they should pay taxes on income received through Bitcoin.

Bitcoin has been formally recognized by some governments and authorities as a “currency”, but in practice, Bitcoin is no different than accepting payment in other forms such as cash or gold or scrip or bounty cards or foreign currency. We think that it is pretty much the same as the local businesses of Superb Barrington, Massachusetts choosing to accept their locally-printed “Berkshire Bucks” to support their local economy.

Contents

Embarking to accept Bitcoin for transactions

Accepting Bitcoin at a petite business is best commenced in whichever manner keeps the accounting elementary for you. This will vary by the type of business you are operating.

Embark with a sign

If you expect that the number of people interested in using Bitcoin is puny, you might simply embark by posting a sign or a note: “We Accept Bitcoin”, and ask people to contact you directly in order to make a payment. Even if hardly anybody uses Bitcoin as a payment method, you’re helping Bitcoin in two ways: one, by enhancing awareness, and two, by making your customers more willing to accept Bitcoin as payment from others in the future, because now they know somewhere they can spend it.

Accepting Payment

If you sell things in a brick and mortar shop, customers can pay using hardware terminals, touch screen apps or elementary wallet addresses through QR Codes.

For an online website, accepting Bitcoin should be implemented by a competent programmer and you should run a total knot, especially if you sell larger-ticket items.

Brainy Phone or Tablet

You can use a dedicated app or webapp that generates a QR code on the fly including the amount. Many wallets directly support QR code scanning for payment.

Accounting

When a customer makes a payment, you might simply issue a credit to their account. Ideally, you want to come in it in a way that suggests you received a payment. If on the other palm, you’re providing “discounts” for Bitcoins, but then you are selling the Bitcoins for currency and then counting that as income, then chances are good that your calculation of income is making up for it. Ask your accountant.

Businesses that suggest bounty cards

If your business sells bounty cards or bounty certificates, you may find that the easiest way to accept Bitcoin is to accept it only for the purchase of bounty cards, and then require the bounty cards to be used for actual purchases of goods or services. This way, the accounting practices you already have in place for processing bounty cards can be put to use. The accounting for Bitcoins would then be minimized to tracking sales of a single SKU.

This method is also ideal for retail food establishments and convenience stores, where the payment of Bitcoins through a mobile phone for a petite daily food purchase might be cumbersome or disruptive, especially in front of a line of other customers. Bitcoins in this case would be best used to reload prepaid cards that can then be swiped at point-of-sale.

If you don’t accept bounty cards, but you already accept credit cards through a swipe terminal, consider the possibility that you could add a retail bounty card system through the swipe terminal you already own. Many point-of-sale terminals, including ones from VeriFone®, are designed around the capability to support numerous applications on the same terminal. Bounty cards are also very profitable because of “breakage”, or in other words, the fact that a significant percentage of them never get redeemed.

You could consider adding a private label bounty card program from a provider who specializes in this, not just as a jumpstart to accepting Bitcoins, but as an extra boost to income. A private label bounty card service provider necessarily have to treat your funds – they can simply provide a solution that keeps track of the balance on the cards on your behalf, including features that permit users to check their balances by phone or by web. Such a solution, of course, is also what makes the cards swipeable through the card reader.

Businesses that mail invoices

Does your business send out invoices to customers? Adding one line may make a big influence for the Bitcoin economy. Perhaps you list it as a payment option just after Visa, MasterCard, and American Express, even if that means your customer must call or e-mail to make a payment.

If you have access to the programming expertise such that you can generate Bitcoin addresses programmatically, consider generating a brand fresh Bitcoin address for each invoice, and print it on the invoice. When a Bitcoin payment arrives, you’ll automatically know where it should arrive.

Customers might wonder how much BTC they should pay in order to please an invoice in total. Your invoice should suggest an amount.

You might be able to anticipate the possibility that even tho’ a Bitcoin address can be printed on an invoice or payment stub, that they are very cumbersome for most people to type, especially being a mix of uppercase and lowercase letters. However, you should most likely still do it anyway. The customer is most likely going to want some paper trail for his payment. Providing him a pre-printed payment stub with a pre-printed address will sate that, because the customer can independently and publicly prove through Block Explorer that the payment took place.

Does your business have a website? On your invoice, consider permitting them to go to a special URL to get the address to make a Bitcoin payment just by typing in their invoice number. This way, they can see the Bitcoin address, copy and paste it directly into their Bitcoin client.

Use a brand fresh address for each invoice whenever possible, and use it only once. This benefits the customer as it eliminates any ambiguity as to which customer is making which payment and for which invoice.

Avoiding fraud

You should also consider the possible risk that fraudsters could send counterfeit invoices to your customers, and entice them to make a payment to a Bitcoin address they control, instead of you. While that isn’t likely in general – it depends on how well a fraudster could find out who your customers are in the very first place – it would certainly be an unpleasant situation if it ever happened. One way you could control that is, whenever possible, never let people attempt to type Bitcoin addresses off payment stubs – instead, force people to get the utter Bitcoin address from your website via secure SSL. But, still print most of the address on the payment stub (perhaps with four or five characters starred out), so that the customer’s need for a paper trail can be sated, so they can prove they paid if there is ever a dispute. Merchants can also use the IP address geolocation to understand the close proximity of users. There is automated solution such as FraudLabs Pro that automates the screening of Bitcoin transactions to determine risk level.

Setting Prices

When a business accepts bitcoins for payment, there generally is the need to convert them to the currencies used for paying suppliers, employees and shareholders. Some merchants set prices based on the current market rate at the time the price quote is introduced to the customer

Bitcoin Prices lists the exchange rate for many currencies on numerous exchanges.

When prices are determined using an automated process, the current market rate can be based on either a current price or on a weighted average basis.

When bitcoin funds for purchases are received, some merchants instantly exchange those proceeds into the preferred currency used. Hedging for each transaction can almost entirely eliminate exchange rate risk that the business is exposed to when accepting bitcoins for payment.

Contract

A sales contract might be used to ensure that specific terms are met to lessen the chances of a misunderstanding. For example, the party sending payment is responsible for paying any transaction fee that might be necessary. A contract might specify that a transaction fee must be paid and what amount, so as to prevent the situation where the transaction is considered a low priority transaction and thus isn’t confirmed quickly.

Other items that might be addressed in a contract:

  • Requirement and treating of escrow through an escrow service.
  • Jurisdiction for disputes.
  • Refund policy (particularly with the exchange rate being volatile)

Paying taxes on Bitcoin income

Tax compliance is a topic of concern for puny businesses. We aren’t accountants or lawyers, and can’t give legal or accounting advice.

But in many respects, Bitcoin transactions work very much like cash. Just like Bitcoin, cash is anonymous and doesn’t leave a paper trail, yet is widely used in commerce every day.

Ask yourself how you would treat a cash transaction. Do you accept cash transactions? Do you normally pay taxes on cash transactions? The response for Bitcoin should very likely be the same.

As for how to determine what a Bitcoin transaction is worth: the IRS, as far as we know, has never issued a guide mentioning how to value Bitcoin transactions. But they have rules and guidelines on how to value transactions made in foreign currency or “cash equivalents”. We imagine the accounting would be similar.

With Bitcoins, there’s likely to be some difference inbetween the value of BTC when you received them as payment, versus when you go to exchange them for another currency like USD, should you determine to do so. This screenplay, likewise, would be no different if you accepted foreign currency or gold as payment. Under some screenplays, it might make sense to book the dollar value of BTC income as it is received, and then to book any difference incurred when it is exchanged for fiat currency. Under others, it might make sense to book the entire thing at the time of exchange.

Perhaps you might talk to your accountant. You don’t need to get into a discussion with your accountant about block chains and private keys or the philosophy behind a decentralized currency. By comparing the fundamentals of Bitcoins to accounting concepts already well understood by the public, you can most likely get all the answers you need. What would you ask your accountant if you determined that you wished to accept Berkshire Bucks or 1-ounce gold coins as payment?

How to accept Bitcoin, for petite businesses – Bitcoin Wiki

How to accept Bitcoin, for puny businesses

It has been suggested that this article is merged with Merchant Howto.

This guide is intended for puny business owners who wish to help promote Bitcoin by accepting it as payment for goods and services. It’s written with the assumption that you operate a regular business that sells goods or services for regular national currency such as dollars, and that you wish to accept Bitcoin as another legal way to pay, and that you intend to pay taxes on your Bitcoin income just like any other income.

With Bitcoin being touted as a way to conduct anonymous transactions and as way to contest with government currency, many petite business owners wonder what’s the right way to accept and account Bitcoin, or if it’s legal or ethical, or whether and how they should pay taxes on income received through Bitcoin.

Bitcoin has been formally recognized by some governments and authorities as a “currency”, but in practice, Bitcoin is no different than accepting payment in other forms such as cash or gold or scrip or bounty cards or foreign currency. We think that it is pretty much the same as the local businesses of Good Barrington, Massachusetts choosing to accept their locally-printed “Berkshire Bucks” to support their local economy.

Contents

Kicking off to accept Bitcoin for transactions

Accepting Bitcoin at a petite business is best commenced in whichever manner keeps the accounting ordinary for you. This will vary by the type of business you are operating.

Commence with a sign

If you expect that the number of people interested in using Bitcoin is puny, you might simply embark by posting a sign or a note: “We Accept Bitcoin”, and ask people to contact you directly in order to make a payment. Even if hardly anybody uses Bitcoin as a payment method, you’re helping Bitcoin in two ways: one, by enhancing awareness, and two, by making your customers more willing to accept Bitcoin as payment from others in the future, because now they know somewhere they can spend it.

Accepting Payment

If you sell things in a brick and mortar shop, customers can pay using hardware terminals, touch screen apps or elementary wallet addresses through QR Codes.

For an online website, accepting Bitcoin should be implemented by a competent programmer and you should run a total knot, especially if you sell larger-ticket items.

Clever Phone or Tablet

You can use a dedicated app or webapp that generates a QR code on the fly including the amount. Many wallets directly support QR code scanning for payment.

Accounting

When a customer makes a payment, you might simply issue a credit to their account. Ideally, you want to come in it in a way that suggests you received a payment. If on the other mitt, you’re providing “discounts” for Bitcoins, but then you are selling the Bitcoins for currency and then counting that as income, then chances are good that your calculation of income is making up for it. Ask your accountant.

Businesses that suggest bounty cards

If your business sells bounty cards or bounty certificates, you may find that the easiest way to accept Bitcoin is to accept it only for the purchase of bounty cards, and then require the bounty cards to be used for actual purchases of goods or services. This way, the accounting practices you already have in place for processing bounty cards can be put to use. The accounting for Bitcoins would then be minimized to tracking sales of a single SKU.

This method is also ideal for retail food establishments and convenience stores, where the payment of Bitcoins through a mobile phone for a petite daily food purchase might be cumbersome or disruptive, especially in front of a line of other customers. Bitcoins in this case would be best used to reload prepaid cards that can then be swiped at point-of-sale.

If you don’t accept bounty cards, but you already accept credit cards through a swipe terminal, consider the possibility that you could add a retail bounty card system through the swipe terminal you already own. Many point-of-sale terminals, including ones from VeriFone®, are designed around the capability to support numerous applications on the same terminal. Bounty cards are also very profitable because of “breakage”, or in other words, the fact that a significant percentage of them never get redeemed.

You could consider adding a private label bounty card program from a provider who specializes in this, not just as a jumpstart to accepting Bitcoins, but as an extra boost to income. A private label bounty card service provider necessarily have to treat your funds – they can simply provide a solution that keeps track of the balance on the cards on your behalf, including features that permit users to check their balances by phone or by web. Such a solution, of course, is also what makes the cards swipeable through the card reader.

Businesses that mail invoices

Does your business send out invoices to customers? Adding one line may make a gigantic influence for the Bitcoin economy. Perhaps you list it as a payment option just after Visa, MasterCard, and American Express, even if that means your customer must call or e-mail to make a payment.

If you have access to the programming expertise such that you can generate Bitcoin addresses programmatically, consider generating a brand fresh Bitcoin address for each invoice, and print it on the invoice. When a Bitcoin payment arrives, you’ll automatically know where it should arrive.

Customers might wonder how much BTC they should pay in order to sate an invoice in utter. Your invoice should suggest an amount.

You might be able to anticipate the possibility that even however a Bitcoin address can be printed on an invoice or payment stub, that they are very cumbersome for most people to type, especially being a mix of uppercase and lowercase letters. However, you should very likely still do it anyway. The customer is very likely going to want some paper trail for his payment. Providing him a pre-printed payment stub with a pre-printed address will please that, because the customer can independently and publicly prove through Block Explorer that the payment took place.

Does your business have a website? On your invoice, consider permitting them to go to a special URL to get the address to make a Bitcoin payment just by typing in their invoice number. This way, they can see the Bitcoin address, copy and paste it directly into their Bitcoin client.

Use a brand fresh address for each invoice whenever possible, and use it only once. This benefits the customer as it eliminates any ambiguity as to which customer is making which payment and for which invoice.

Avoiding fraud

You should also consider the possible risk that fraudsters could send counterfeit invoices to your customers, and entice them to make a payment to a Bitcoin address they control, instead of you. While that isn’t likely in general – it depends on how well a fraudster could find out who your customers are in the very first place – it would certainly be an unpleasant situation if it ever happened. One way you could control that is, whenever possible, never let people attempt to type Bitcoin addresses off payment stubs – instead, force people to get the total Bitcoin address from your website via secure SSL. But, still print most of the address on the payment stub (perhaps with four or five characters starred out), so that the customer’s need for a paper trail can be sated, so they can prove they paid if there is ever a dispute. Merchants can also use the IP address geolocation to understand the close proximity of users. There is automated solution such as FraudLabs Pro that automates the screening of Bitcoin transactions to determine risk level.

Setting Prices

When a business accepts bitcoins for payment, there generally is the need to convert them to the currencies used for paying suppliers, employees and shareholders. Some merchants set prices based on the current market rate at the time the price quote is introduced to the customer

Bitcoin Prices lists the exchange rate for many currencies on numerous exchanges.

When prices are determined using an automated process, the current market rate can be based on either a current price or on a weighted average basis.

When bitcoin funds for purchases are received, some merchants instantly exchange those proceeds into the preferred currency used. Hedging for each transaction can almost entirely eliminate exchange rate risk that the business is exposed to when accepting bitcoins for payment.

Contract

A sales contract might be used to ensure that specific terms are met to lessen the chances of a misunderstanding. For example, the party sending payment is responsible for paying any transaction fee that might be necessary. A contract might specify that a transaction fee must be paid and what amount, so as to prevent the situation where the transaction is considered a low priority transaction and thus isn’t confirmed quickly.

Other items that might be addressed in a contract:

  • Requirement and treating of escrow through an escrow service.
  • Jurisdiction for disputes.
  • Refund policy (particularly with the exchange rate being volatile)

Paying taxes on Bitcoin income

Tax compliance is a topic of concern for petite businesses. We aren’t accountants or lawyers, and can’t give legal or accounting advice.

But in many respects, Bitcoin transactions work very much like cash. Just like Bitcoin, cash is anonymous and doesn’t leave a paper trail, yet is widely used in commerce every day.

Ask yourself how you would treat a cash transaction. Do you accept cash transactions? Do you normally pay taxes on cash transactions? The response for Bitcoin should very likely be the same.

As for how to determine what a Bitcoin transaction is worth: the IRS, as far as we know, has never issued a guide mentioning how to value Bitcoin transactions. But they have rules and guidelines on how to value transactions made in foreign currency or “cash equivalents”. We imagine the accounting would be similar.

With Bitcoins, there’s likely to be some difference inbetween the value of BTC when you received them as payment, versus when you go to exchange them for another currency like USD, should you determine to do so. This script, likewise, would be no different if you accepted foreign currency or gold as payment. Under some screenplays, it might make sense to book the dollar value of BTC income as it is received, and then to book any difference incurred when it is exchanged for fiat currency. Under others, it might make sense to book the entire thing at the time of exchange.

Perhaps you might talk to your accountant. You don’t need to get into a discussion with your accountant about block chains and private keys or the philosophy behind a decentralized currency. By comparing the fundamentals of Bitcoins to accounting concepts already well understood by the public, you can very likely get all the answers you need. What would you ask your accountant if you determined that you wished to accept Berkshire Bucks or 1-ounce gold coins as payment?

How to accept Bitcoin, for puny businesses – Bitcoin Wiki

How to accept Bitcoin, for puny businesses

It has been suggested that this article is merged with Merchant Howto.

This guide is intended for petite business owners who wish to help promote Bitcoin by accepting it as payment for goods and services. It’s written with the assumption that you operate a regular business that sells goods or services for regular national currency such as dollars, and that you wish to accept Bitcoin as another legal way to pay, and that you intend to pay taxes on your Bitcoin income just like any other income.

With Bitcoin being touted as a way to conduct anonymous transactions and as way to challenge with government currency, many puny business owners wonder what’s the right way to accept and account Bitcoin, or if it’s legal or ethical, or whether and how they should pay taxes on income received through Bitcoin.

Bitcoin has been formally recognized by some governments and authorities as a “currency”, but in practice, Bitcoin is no different than accepting payment in other forms such as cash or gold or scrip or bounty cards or foreign currency. We think that it is pretty much the same as the local businesses of Superb Barrington, Massachusetts choosing to accept their locally-printed “Berkshire Bucks” to support their local economy.

Contents

Beginning to accept Bitcoin for transactions

Accepting Bitcoin at a petite business is best embarked in whichever manner keeps the accounting elementary for you. This will vary by the type of business you are operating.

Commence with a sign

If you expect that the number of people interested in using Bitcoin is puny, you might simply begin by posting a sign or a note: “We Accept Bitcoin”, and ask people to contact you directly in order to make a payment. Even if hardly anybody uses Bitcoin as a payment method, you’re helping Bitcoin in two ways: one, by enlargening awareness, and two, by making your customers more willing to accept Bitcoin as payment from others in the future, because now they know somewhere they can spend it.

Accepting Payment

If you sell things in a brick and mortar shop, customers can pay using hardware terminals, touch screen apps or ordinary wallet addresses through QR Codes.

For an online website, accepting Bitcoin should be implemented by a competent programmer and you should run a utter knot, especially if you sell larger-ticket items.

Wise Phone or Tablet

You can use a dedicated app or webapp that generates a QR code on the fly including the amount. Many wallets directly support QR code scanning for payment.

Accounting

When a customer makes a payment, you might simply issue a credit to their account. Ideally, you want to inject it in a way that suggests you received a payment. If on the other forearm, you’re providing “discounts” for Bitcoins, but then you are selling the Bitcoins for currency and then counting that as income, then chances are good that your calculation of income is making up for it. Ask your accountant.

Businesses that suggest bounty cards

If your business sells bounty cards or bounty certificates, you may find that the easiest way to accept Bitcoin is to accept it only for the purchase of bounty cards, and then require the bounty cards to be used for actual purchases of goods or services. This way, the accounting practices you already have in place for processing bounty cards can be put to use. The accounting for Bitcoins would then be minimized to tracking sales of a single SKU.

This method is also ideal for retail food establishments and convenience stores, where the payment of Bitcoins through a mobile phone for a petite daily food purchase might be cumbersome or disruptive, especially in front of a line of other customers. Bitcoins in this case would be best used to reload prepaid cards that can then be swiped at point-of-sale.

If you don’t accept bounty cards, but you already accept credit cards through a swipe terminal, consider the possibility that you could add a retail bounty card system through the swipe terminal you already own. Many point-of-sale terminals, including ones from VeriFone®, are designed around the capability to support numerous applications on the same terminal. Bounty cards are also very profitable because of “breakage”, or in other words, the fact that a significant percentage of them never get redeemed.

You could consider adding a private label bounty card program from a provider who specializes in this, not just as a jumpstart to accepting Bitcoins, but as an extra boost to income. A private label bounty card service provider necessarily have to treat your funds – they can simply provide a solution that keeps track of the balance on the cards on your behalf, including features that permit users to check their balances by phone or by web. Such a solution, of course, is also what makes the cards swipeable through the card reader.

Businesses that mail invoices

Does your business send out invoices to customers? Adding one line may make a big influence for the Bitcoin economy. Perhaps you list it as a payment option just after Visa, MasterCard, and American Express, even if that means your customer must call or e-mail to make a payment.

If you have access to the programming expertise such that you can generate Bitcoin addresses programmatically, consider generating a brand fresh Bitcoin address for each invoice, and print it on the invoice. When a Bitcoin payment arrives, you’ll automatically know where it should arrive.

Customers might wonder how much BTC they should pay in order to please an invoice in total. Your invoice should suggest an amount.

You might be able to anticipate the possibility that even tho’ a Bitcoin address can be printed on an invoice or payment stub, that they are very cumbersome for most people to type, especially being a mix of uppercase and lowercase letters. However, you should most likely still do it anyway. The customer is very likely going to want some paper trail for his payment. Providing him a pre-printed payment stub with a pre-printed address will please that, because the customer can independently and publicly prove through Block Explorer that the payment took place.

Does your business have a website? On your invoice, consider permitting them to go to a special URL to get the address to make a Bitcoin payment just by typing in their invoice number. This way, they can see the Bitcoin address, copy and paste it directly into their Bitcoin client.

Use a brand fresh address for each invoice whenever possible, and use it only once. This benefits the customer as it eliminates any ambiguity as to which customer is making which payment and for which invoice.

Avoiding fraud

You should also consider the possible risk that fraudsters could send counterfeit invoices to your customers, and entice them to make a payment to a Bitcoin address they control, instead of you. While that isn’t likely in general – it depends on how well a fraudster could find out who your customers are in the very first place – it would certainly be an unpleasant situation if it ever happened. One way you could control that is, whenever possible, never let people attempt to type Bitcoin addresses off payment stubs – instead, force people to get the utter Bitcoin address from your website via secure SSL. But, still print most of the address on the payment stub (perhaps with four or five characters starred out), so that the customer’s need for a paper trail can be sated, so they can prove they paid if there is ever a dispute. Merchants can also use the IP address geolocation to understand the close proximity of users. There is automated solution such as FraudLabs Pro that automates the screening of Bitcoin transactions to determine risk level.

Setting Prices

When a business accepts bitcoins for payment, there generally is the need to convert them to the currencies used for paying suppliers, employees and shareholders. Some merchants set prices based on the current market rate at the time the price quote is introduced to the customer

Bitcoin Prices lists the exchange rate for many currencies on numerous exchanges.

When prices are determined using an automated process, the current market rate can be based on either a current price or on a weighted average basis.

When bitcoin funds for purchases are received, some merchants instantly exchange those proceeds into the preferred currency used. Hedging for each transaction can almost entirely eliminate exchange rate risk that the business is exposed to when accepting bitcoins for payment.

Contract

A sales contract might be used to ensure that specific terms are met to lessen the chances of a misunderstanding. For example, the party sending payment is responsible for paying any transaction fee that might be necessary. A contract might specify that a transaction fee must be paid and what amount, so as to prevent the situation where the transaction is considered a low priority transaction and thus isn’t confirmed quickly.

Other items that might be addressed in a contract:

  • Requirement and treating of escrow through an escrow service.
  • Jurisdiction for disputes.
  • Refund policy (particularly with the exchange rate being volatile)

Paying taxes on Bitcoin income

Tax compliance is a topic of concern for puny businesses. We aren’t accountants or lawyers, and can’t give legal or accounting advice.

But in many respects, Bitcoin transactions work very much like cash. Just like Bitcoin, cash is anonymous and doesn’t leave a paper trail, yet is widely used in commerce every day.

Ask yourself how you would treat a cash transaction. Do you accept cash transactions? Do you normally pay taxes on cash transactions? The reaction for Bitcoin should most likely be the same.

As for how to determine what a Bitcoin transaction is worth: the IRS, as far as we know, has never issued a guide mentioning how to value Bitcoin transactions. But they have rules and guidelines on how to value transactions made in foreign currency or “cash equivalents”. We imagine the accounting would be similar.

With Bitcoins, there’s likely to be some difference inbetween the value of BTC when you received them as payment, versus when you go to exchange them for another currency like USD, should you determine to do so. This script, likewise, would be no different if you accepted foreign currency or gold as payment. Under some screenplays, it might make sense to book the dollar value of BTC income as it is received, and then to book any difference incurred when it is exchanged for fiat currency. Under others, it might make sense to book the entire thing at the time of exchange.

Perhaps you might talk to your accountant. You don’t need to get into a discussion with your accountant about block chains and private keys or the philosophy behind a decentralized currency. By comparing the fundamentals of Bitcoins to accounting concepts already well understood by the public, you can very likely get all the answers you need. What would you ask your accountant if you determined that you wished to accept Berkshire Bucks or 1-ounce gold coins as payment?

Related video:

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