Thanks everyone for dialing in and joining @meknab (find her on Twitter as @knotmegan) and myself today. I learned a lot, and appreciate Megan taking the time.
The video capture is here Video Conferencing, Web Conferencing, Webinars, Screen Sharing - Zoom
I live typed some rough notes as Megan was talking in the HackMD file – I’ve pasted in those notes here so we have a permanent record.
Megan shared a budget variance spreadsheet template: Budget - Google Sheets (File > Make a Copy for your own version).
I previously shared a cashflow / budget template that I use:
For “regular” accounting, we mentioned a “command line accounting tool” beancount: Double-Entry Accounting from Text Files. Personally I use and have recommended Xero https://xero.com for multi-currency. @serapath on Twitter recommended Wave https://waveapps.com (Canadian company, they are good for sole proprietorship / small businesses) and QuickFile https://www.quickfile.co.uk/ (UK businesses)
CoinGeck has historical USD / ETH prices https://www.coingecko.com/en/coins/ethereum/historical_data/usd#panel – what other sources of historical price data? For different currency pairs, eg CAD, EUR, etc.?
For EthMagicians, this is my rough TO DO that I’ll turn into Github Issues:
- multisig additions – adding AT LEAST a third person (@Flash) and do 2 of 3
- write down policy for expenses
- going back paying Boris back for Berlin while applying policy of cost of ETH at that time
- 2018 “books” – look back at actuals
- budget
- per event budget
- we have one for Paris
- are we doing two more events this year?
- open collective - further thoughts on how this interacts as fiscal sponsor
Megan will be at ETHDenver in the Business Models ring – see ETH Denver Magicians Applications and Gatherings
Find out more about Megan’s startup Veriledger https://veriledger.io/
Notes
Budget v actual analysis template Budget - Google Sheets
High volume & categorizing transactions is a big pain for accounting
Talked to a lot of people, nothing quite ready
Talked to accounting firms about outsourcing – not that many accountants / book keepers that know anything
Also expensive
Concept of Veriledger – automate super simple accounting procedures – take in data, GAAP standards, international accounting standards
Normal non-crypto, lots of software for automating biz process – lots doesn’t in crypto
Not technical – accounting person
Veriledger – integrating Exchanges and pulling data off of Ethereum
- not just value of portfolio, but simple General Ledger stuff
- creating financial statements
- running a budget
- release in April
Crypto Book-keeping 101
Chart of accounts
- Before Quickbooks etc.
- actual journals kept
- most enter in general ledger
- assets, liabilities, equity, revenue, expenses
- first three are balance sheet – other are income statements
- PNL for Proft and Loss
Find templates online
Using QB or Xero
Megan has a template – can share
Chart of Accounts won’t fit business perfectly
Nature of operations – level of granularity
What is your business doing?
Chart of Accounts tailored to Domicile – esp for tax payments
If you have an international business you need a chart per entity – roll up for consolidated
How to categorize those kinds of transactions?
have a methodology that works for me (Megan)
Financial reporting vs. tax reporting
Chart of Accounts is for financial reporting
Having an account for ForEx differences, fair market value, having something that holds gains or losses
I (Megan) likes a lot of granularity
James Q: templates for chart of accounts
LLC, Service Based business
Don’t touch chart of accounts once setup
Little accounting annoying thing – e.g. different tax accounts
Setting up a budget
- have a template – HackMD
- Boris: share link on EthMagicians
- some people put budgets into another bucket
Reconciliation process
- tagging transactions to the ledger
- month is standard process
When going through crypto transactions
- cost basis – biggest pain points
- price per coin that you paid
Other areas of world, taxed as asset, on cost basis
When you pull off exchanges, don’t have cost basis
Pulling Wallet history off etherscan – cost basis not included
5 day rolling average, closing price on Coin Market Cap
Document
Write a policy in your teams Google Drive
Trade off between precision
https://www.coingecko.com/en/coins/ethereum/historical_data/usd#panel
Equivalency in native currency – USD, CAD, etc
Need to write it down
Can be annoying – making it easier
Once you create good habits
Creating an audit file
Certain software like Quickbooks, Xero – can upload support
File folder that has logical organization
Taking in revenue in crypto
Best practices – convert it to fiat right away
Once you get it, it’s Fair Market Value
Want to convert it right away
Coinbase, BitGo – do it right away
Bryant: what about DAI?
Doesn’t mean you don’t need to track cost basis
G-USD – where it literally is a fiat tie (Gemini) – regulated exchanges, Circle too
Having audited financial statements – most small companies don’t need it
Investors
Line of Credit
Expensive – have to hire them to come in
Months long, sitting with the audit team
Budget to Actual – do a variance
Pop the real, actual numbers – column that will populate the difference
Last piece – taking a moment, to reflect on your numbers
Are these numbers telling the story of your business?
What we were going to do?
We were going to do ETH → DAI
Have someone pay expenses, give DAI to them?
- if you are transacting in and out of crypto, always taxable
- if you’re paying people back – not paying employees in crypto currency W2
- coal miners being paid in coupons
- W2 have to be paid in
Figuring out how to financially empower EthMagicians, open source groups
I (Megan) want to get involved more in open source, why not just create a
What we are trying to do – other cool groups – Digital Chamber of Commercie – AICPA(?) are paying attention
Consensys has done lots of lobbying
This is how it should be – this is how we’re treating it
Another mission, let’s create a good standard – methodology for calculating cost basis
Treasury Management
Emotional constancy exercises – trading in traditional markets, and especially in crypto markets – is an emotional process
Make logical, financial based decisions
All about setting parameters
When you’re doing your budget
One of the things you should be paying attention to
Once you have that for the next 3, 6, 12 months – if you’re levered – if 80% of expenses is fiat currency, if your portfolio is 50% crypto
Trying to bet, is not a good way to manage your business
At a regular point – depends on the wick of the portfolio
Maybe it’s once a week, once a month
Rebalancing with your liabilities
Risk tolerance
Convert back to USD
Measuring your crypto portfolio – to USD
Continue to keep it in portfolio
But also taxes from profit taking
Flip side – working on escrow service
Need a lot of that native currency in their reserves
Need to pay for gas fees
what is the lowest price you’ll tolerate (stop gap) – before you liquidate
what is reasonable profit margin on crypto? 30x?
principles – like stop gap, is a good policy
memorialize
incorporation documents
Policy folder –
Liquidity strategy
Simple to say – making sure you are in the right exchanges
Making sure you can trade out of alt coins
Prepared to press a button
People who “donate” – can’t take that as a deduction
Closing after big events
Recommend – working through reconciliation
Organizational wallet
- using a multisig
- keeping public address in chart of accounts?
- it’s possible to do?
- implicit in USD – break it down by asset
- aggregate all ETH
- exchange account or wallet
Veriledger
Quickbooks plugin
Accounting leave a lot to be desired
Open source