Using Bitcoin With QuickBooks- Recording Sales And Accepting Payments

This is the first part of a multi-part series that will explain how to implement bitcoin as a payment method using any of the desktop versions of QuickBooks. This procedure will allow you to properly account for the full extent of your Bitcoin sales and integrate those sales into your business records as if they had originally been made in US Dollars.

This series refers to the 2014 version of QuickBooks, but the concepts will be the same regardless of what software or version you use. The precise implementation may vary somewhat. I assume as a pre-requisite that you have a basic knowledge of financial accounting, that you are familiar with your accounting software package and that the amounts that you record are determined with reference to US Dollars.

This series does not discuss Intuit’s PayByCoin service, which is only available with QuickBooks Online.  You can find my review of that service here.

Multi-Currency Support In QuickBooks

Starting in 2009, most US desktop versions of QuickBooks featured native multi-currency support. You can activate this function from the preferences menu.  It allows rates to be automatically updated from the internet. The QuickBooks file has a default or “home” currency and then tracks as many other foreign currencies as needed, with the functional currency set by vendor, customer, or account.

Use of the multi-currency feature comes with a few caveats- First, QuickBooks will only update currencies automatically when the home currency is US Dollars, so this feature may not work well for users outside the US. Second, add-ins like Statement Writer and Fixed Asset Manager will only work with US Dollars, meaning financial statements cannot be denominated in Bitcoin if you choose to hold them as an asset. Finally, QuickBooks does not integrate with many of the Bitcoin intermediaries in common use at this time. Thus, billing and collection would require an extra step even if you did use multi-currency. For these reasons, I don’t recommend use of multi-currency support with bitcoin.

BitPay supports ledger downloads in Intuit Interchange File format (.iif). Though this may save some data entry work if your business has considerable Bitcoin transaction activity with BitPay, you will still need to create the accounts in QuickBooks to classify your transactions.

Booking Sales

Record the sale as you normally would, using the programmed workflow in QuickBooks (either “create statements” or “create invoices”) in your functional currency (USD, Euro, etc.). If you request funds using CoinBase, BitPay, or another payment service provider, you may want to select the option bill with reference to your functional currency instead of directly in Bitcoin in order to reduce your exchange risk.

Prepare Accounts

Before recording payment, you will need to add two new accounts to your company’s chart of accounts (you only need to add these accounts once). From the home screen, select “Chart of Accounts”, then select the “Account” tab and click “New.” The first account will be an “Other Current Asset” account (under “Other Account Types”) called “Bitcoin” (or “Bitcoin Wallet” or whatever works for you). The tax line mapping will be “not tax related.” The second account will be an income account called “Bitcoin Exchange Gains.” The tax line mapping will be “other income.” You may also want to add an expense account called “Bitcoin Exchange Losses”, though gains and losses generally should net out and show up as a single line item on your Profit and Loss statement. Close the chart of accounts.

Add Bitcoin As A Payment Method

From the home screen, select the “Receive Payments” function (also accessible from the Customers menu). On the “Customer Payment” screen, select the “More” button adjacent to the cluster of payment method buttons. Then select “add new payment method.” The new payment method will be called “Bitcoin” of type “Cash.” Select “Ok.”

Accept Payment In Bitcoin

To record a payment on account in bitcoin, click the “Receive Payments” button and select the customer from the “Received From” menu. Input the amount received in dollars. This should be the same amount that you billed, even if the exchange rate fluctuated between billing and receipt, or else QuickBooks will show an unresolved debit or credit balance on the customer’s account. Click the “More” payment method button (looks like a plus sign), then select “Bitcoin.” In the “Deposit To” box, select the other current asset account you created to track your Bitcoin Wallet. Your customer should now show payment in full for the associated invoice.

Be cautious here if you accept multiple forms of payment.  You will need to check that the correct “Deposit To”  account is selected each time, or else your check payments, etc. could end up being entered into your bitcoin wallet.

Notes

There are usually multiple ways that a given transaction can be recorded in QuickBooks.  I believe this procedure is less complicated than some of the others out there. Since you are already using the regular QuickBooks workflow, you should have no problems with your Cost of Goods Sold or Accounts Receivable showing unexplainable balances (they will be denominated in dollars, just as you recorded them).

Always remember to record sales and payments in QuickBooks using the “Create Invoices” and “Receive Payments” functions. Not doing so may result in misclassification or under reporting of income, unapplied customer payments and other undesired results.

The next part of the series will be “Revaluing Your Wallet and Converting to Cash.” Feel free to contact me with feedback, questions, or requests.

UPDATE 10/30/14: In some versions of QuickBooks, the procedure for accepting payments in BTC generates a billable expense in the invoice queue for the associated customer. I haven’t been able to work through why this happens yet. It is bothersome, but easy to clear by creating an invoice for the blank expense and then just voiding or deleting it. If you accept BTC and consistently have overstated receivables, this may be why.

This article originally appeared in Bitcoin Magazine during the autumn of 2013.