Accountants will be quick to underestimate the challenge of managing crypto clients. Here are some things to look out for if you’re a crypto business looking for a great accountant.
1. What software do they use to manage crypto?
This is typically the first signal. Ask your accountant what software they use to manage crypto. If they say something like we use Excel or CSV, then this is your red flag.
If they say they use software like Koinly, CoinTracking, Accointing, or CryptoTaxCalculator, this is okay but still a red flag. The reason is that these softwares are more geared towards personal tax than business accounting. At detof, we will use these software if the client has many transactions on niche chains or exchanges as it saves us time then adding the transactions manually into the business crypto accounting software.
Accountants should be using software like Breezing or Cryptio. These are software specifically tailored to help businesses with their crypto accounting. This means pulling transactions from the blockchain and creating a journal entry into your accounting software.
2. What software do they use in general for accounting?
So maybe this is your accountants first crypto client and so you can’t really ask him the question above. The next best question is to ask him what accounting software he or she uses. If the answer is something like Abacus, Sage or Microsoft Dynamics, this is a red flag.
These tend to be old school accounting applications which are usually overkill for the client’s stage of the business. Some of these are also non cloud based and almost all of them don’t provide an interface for you, the client, to access. This means every time you need something, you need to ask your accountant and get billed.
You want them to use modern accounting software like Xero, Quickbooks and Bexio (somewhat modern and only for Switzerland). These are cloud based accounting solutions that give you access to the software. There is also a community of apps that are building around these solutions so you will have options for support.
3. What accounting method do they use to calculate net gain loss for crypto?
Another key method is to ask them which accounting method they use to calculate net gain loss for crypto. In Switzerland and most jurisdictions, you need to calculate net gain loss on every single crypto transaction.
To be clear, this is not simply taking the value of your crypto at year end and subtracting it with the value of your crypto at the beginning of the year. Your accountant needs to keep a cost basis for each crypto asset and when crypto leaves your wallets he/she needs to calculate a net gain or loss on that transaction and book it into the accounting system on the income statement.
If your accountant replies to this question with the above answer, run for the hills. If he/she doesn’t know what you’re talking about, start running as well. If he/she replies that they use Weight Average Cost or Average Cost Basis or First In First Out, then you’re in safe hands.
There are most detailed questions you can ask of course like how would you handle SAFTs or value NFTs or manage DeFI activity but ultimately if your accountant can pass the three questions above, then he/she is likely already in the top percentile of accountants who can manage crypto and they will figure the other details out as they work with you.
Feel free to contact us as detof if you want our feedback on your current accountant. We will be as objective as possible and no need to consider us as an option.