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Crypto Guides

How to accept crypto payments for business in Australia

By December 21, 2018 December 24th, 2018 No Comments

Wondered how to accept crypto payments?

If you’re an Australian business who wants to accept crypto payments, does not have a storefront, operates online, or issues electronic invoices, this guide is for you. You’ve heard Bitcoin, Blockchain, and all the other buzzwords. Besides the hype, crypto is here to stay. This guide shows you to accept crypto payments for your business, and we will be updating it to include E-commerce and store-front businesses in the near future.

By opting to accept crypto payments, your business can service a whole new clientele. That’s exciting and challenging, and also comes with risks, but you can be a real contributor to the future of digital currencies. Getting started requires setting up a payment merchant, adjusting your invoices, and creating an account with an exchange. Hopefully at the end of this guide, you’ll have customers paying you in Bitcoin.

If you’re new to cryptocurrencies, I strongly recommend becoming acquainted first. Our guide on cryptocurrencies will get you well on your way. If you’re after something more in depth and guided, our cryptocurrency fundamentals course covers all the basics, and its free.

Crypto prices are too volatile!

Yes, they are. And that makes it tough for anyone to make the decision to accept crypto payments. But bear with me. There is incredible free tools available to help mitigate the risk of price volatility. Not only that, but these tools are mostly automated these days.

We know this because we have done it ourselves. We have been accepting, paying, and functioning as a business with cryptocurrencies for over a year. Honestly, its been a massive challenge. From documentation, tax, accounting, price fluctuations, you name it. The great thing for you is, we have tried and tested dozens of different methods, and have done most of the hard work for you.

But here is the truth. This guide is based on our experiences and what we found is best. There is no ‘best practice‘ yet. Further, to accept crypto payments without a very good understanding of the technology is high risk. You need to know what you’re doing and take full responsibility if something goes wrong. This is just a guide. It is not a recommendation to trade, and it is not investment advice.

Guide Overview

Here is what we cover in this guide;

  1. Setting up an exchange account
  2. Setting up CoinPayments
  3. Creating a point of sale link
  4. Adding payment information to an invoice
  5. How to guide your client
  6. Receiving the crypto payment
  7. Selling the crypto payment
  8. Tax & Accounting

1. Setting up an exchange account

Image of Independent reserve exchange needed for the accept crypto payments guideFirst things first, we need to set up an account with an exchange. By doing this, you can configure the payment merchant to send the crypto payment to the exchange. This is done automatically after a payment is made, so its there ready for you to sell once it arrives.

Setting up an account with exchange requires KYC (know-your-customer). This means you’ll need some personal identification at the ready.

A drivers licence, passport, and other ID is useful and convenient. You’ll also need your business documentation because you’ll need to register an account in the name of your business.

Now, depending on where you live is which exchange you will use. Independent Reserve has the lowest trading fees, although is a little technical to use it. We are still going to use it. If you’re located somewhere other than Australia, New Zealand, or the United States, then you can set up an account using Coinbase. The process will still be very much the same.

Create an exchange account

This is an affiliate link. Its free for you but supports us through commissions.

After creating an account, you will need to wait 24-48 hours to be verified and approved. We can complete the remaining steps while we wait.

2. Setting up the payment merchant

Image of CoinPayments Merchant needed for the accept crypto payments guide

Now we need to create an account on CoinPayments, which is a crypto payments merchant. This merchant acts as an intermediary, allowing you to choose which cryptocurrencies you want to accept. It also lets you ‘peg’ your crypto payment invoice amount to normal fiat currency, like USD to AUD or even EURO’s. This is very important to help minimise price volatility.

Create a merchant account

This is an affiliate link. Its free for you but supports us through commissions.

After you’ve gone through the sign up process, we will need to arrange some settings. These settings will be to determine which cryptocurrencies you want to accept. We choose to accept bitcoin, Ethereum, Litecoin, and Dash, as these are some of the least volatile, and can also be converted to bitcoin.

Steps to setup Coin Payments.

Image of CoinPayments Coin Settings for the accept crypto payments guide

  1. Login to your account and go to Coin Settings.
  2. Under ‘enabled‘ column, click Bitcoin or whatever currency you want to accept.
  3. Under column ‘Payment Address‘, you can input your wallet or exchange address, or leave it blank.
  4. Payment Mode can be selected to auto-convert coins to Bitcoin, or to auto sent to your wallet or exchange address.
  5. Under the discount column, you can place a negative % if you want to cover conversion and brokerage costs.
  6. In the last column, you can change the maximum USD limit for any one transaction.

These settings will allow your invoice to be paid in multiple cryptocurrencies. Once a payment is made, the cryptocurrencies will go into your Coinpayments wallet. If you set it up for ASAP modes, it might convert it to bitcoin or auto-send to your exchange of choice. Its really up to you.

CoinPayments has tools to allow relatively easy conversion to fiat. The advantages of fiat conversion are huge. Instead of receiving bitcoin and having to hold it, you can set it up to auto-send to an exchange. Once a payment is made, you can login to the exchange and sell the coins. The selling process is still manual for now, but its the best we have right now for Australian dollars.

3. Creating a point of sale link

Now we have CoinPayments set up, you’re just about ready to accept crypto payments. To do this, we need to generate a custom point of sale link. This link can be added to an invoice or emailed, and will be followed by your customer to make the payment.

In the top right hand menu of the CoinPayments window, you’ll see menu items. Follow More >> Merchant Tools.

Image of CoinPayments Merchant Tool Settings for the accept crypto payments guide

Next up, you’ll need to look to the right hand side of the screen. Follow and click >> PoS Link & QR Code Generator

Image of the POS Link Generator for the accept crypto payments guide

Here is where we will generate the point-of-sale link that you will supply to your customers.

Image of the POS Link Generator fields for the accept crypto payments guide

  1. On the form you will see a number of fields. The first field is your merchant ID, no need to change this.
  2. The second field is Payment Description, where you describe what the payment is for. I.e. hedge trimming work.
  3. Next is the Initial Amount you are charging in whatever currency you are billing in. This is important as this is what the crypto payment will be pegged too. If you are charging in Euros, you’ll need to select EURO, US dollars, it will be USD, If Australian dollars, AUD, and so on. You’ll also need to be sure to add any applicable taxes to the amount your billing in. For us in Australia, we need to add GST. So for a $500 invoice, i’ll need to be sure to create the point of sale link to charge $550 to include the GST component.
  4. Up next is the Change Currency field. This lets your customer pay any of the pre-selected coins you chose earlier. If you chose Bitcoin, Ether, Litecoin and Dash, the customer can pay in any of these.
  5. Next field is the Custom Field. This is where you should put the number of your invoice (if applicable).
  6. The link now needs to be generated by clicking the Generate Link button.
  7. Bottom of the page is the custom link that has been generated. This is what you will copy and paste into your invoice, or email to your customer.

For good measure, open the link in a private browser window. This is what should show up and will be what your customer sees.

Image of the client-side point of sale for the accept crypto payments guide

4. Adding payment information to an invoice

Now we’ve covered how to create the PoS link, it’s time to add it to an invoice. This part is a bit clunky and tricky, but it’s important to get it right. According to the Australian Tax Office’s Cryptocurrency guidelines, this is what they say about using crypto payments within your business.

If you receive cryptocurrency for goods or services you provide as part of your business, you need to include the value of the cryptocurrency in Australian dollars as part of your ordinary income. This is the same process as receiving any other non-cash consideration under a barter transaction.

Now because we will be using the CoinPayments merchant to peg the cryptocurrency payment to the dollar amount your invoicing, this does it automatically. The above applies if you are charging directly in cryptocurrency and not in Australian dollars. For example;

Scenario 1 – Payment in bitcoin

You just completed some work for a client and agree upon payment of 2 bitcoin. The amount those bitcoin are worth in dollars needs to be represented on your invoice, as does the payment details. You’ll need to find the price of bitcoin at the time of invoicing from a reputable exchange, and show it. For example, “2 BTC equals $5,500 at the time of invoicing which is 5/5/18 at 5:00 PM AEST time”.

Scenario 2 – Payment in bitcoin pegged to AUD

You completed work for a client and agree upon payment of $500 AUD to be paid in Bitcoin. Regardless of the price of bitcoin at the time, you will be paid equivalent to what $500 of bitcoin is worth when the client goes to pay. Your records of payment are both the invoice, and the merchant payment through CoinPayments.

Scenario 2 is the preferred option for us as we significantly reduce price volatility this way. It also makes it a lot easier for record keeping when invoicing because all we do is add a link to the invoice that takes the client to CoinPayments. Easy as that.

So following on from scenario 2, here are the steps you need to take;

  1. Prepare your invoice as you normally would
  2. Login to CoinPayments and generate a PoS link as we demonstrated in Section 3 above.
  3. Copy the PoS link and paste it into your invoice (you can paste just the link, or embed it under a ‘Pay with Crypto’ button. Really depends on your accounting software)

Image of the invoice PoS link for the accept crypto payments guide

That’s really it. Its a slightly manual process, but its the most efficient we have found yet. I believe in the future that accounting apps like Xero may actually integrate a crypto payments generator. They currently have one for PayPal which we use also.

5. How to guide your client

I included this section as its important your client knows how to use and navigate the CoinPayments point-of-sale. Even if they are experienced using cryptocurrency, there is a high chance they have not used this interface before or may be suspect of the link you provided. When you decide to accept crypto payments, you have to make it easy for the person on the other side.

What I suggest is creating some test PoS links yourself for small amounts, say $1, and going through the payments process several times. This will give you a good understanding of the process.

Be sure to tell your client when they come to the PoS screen, to double check the $ amount. The figure will be auto-populated from the amount you put in earlier when generating the link. Technically they can modify this, but they shouldn’t as it needs to reflect your invoiced amount (plus GST if in Australia).

It may even be useful to share this guide with them, or to get on the phone with them for the first payment.

6. Receiving the crypto payment

Once your client has made the payment, you will be notified by CoinPayments that a payment is made. You will receive several emails that look a little something like this.

Image of the emails received from CoinPayments for the accept crypto payments guide

  1. The first email is a notification that the client has submitted funds to CoinPayments.
  2. The second email is a notification that funds have been received by CoinPayments.
  3. The third email is a notification that the funds have been confirmed by the blockchain, and are now available in your CoinPayments wallet.

You now have to make a decision whether you will send the cryptocurrency from CoinPayments to a wallet, or an exchange. Furthermore, we recommend transferring the funds off CoinPayments as soon as possible. This is because you do not control the private key when keeping coins on CoinPayments. Crypto funds are always vulnerable when stored with a third party that controls your private key.

7. Selling the crypto payment

Should you sell it or keep it?

Whatever you do is your choice and should be based on your own risk profile. We are big believers in crypto so we tend to keep as much as much as we can afford. This has burnt us though, as the fiat value of our holdings has taken a real hit this year. We’ve also been burned by waiting too long to sell, resulting in a 20% drop in the fiat value of the payment. It sucks, but these are early days and we are just excited to be part of a revolution towards sound money. To accept crypto payments is the transition step before its widely adopted and used everywhere.

If you keep it

Having a hardware wallet or software wallet where you control the private key is the first step. Wallets like Ledger and Trezor offer an easy and convenient option as they accept a number of cryptocurrencies.

We made a set up tutorial for the Ledger Nano S here and the Trezor Model T here.

Once you have a wallet set up, you should to transfer the coins from CoinPayments to the wallet. You can actually setup CoinPayments to do this automatically under the ‘Payout Mode‘ field. By putting in the corresponding address to the coin, CoinPayments will divert the payment to your wallet instantly after your client makes a payment. Its pretty handy if you dont intend on selling it.

If you sell it

If you do decide to sell it, consider adding a volatility percentage to the payment in the wallet settings. Under the ‘Discount‘ field, you can put in a negative percentage. This will increase the payment required for that particular coin when the client goes to pay. It could be a good idea as insurance to cover potential volatility. Just make sure to put this in your payment terms so the client knows there is a premium.

So once your payment is recieved by CoinPayments, you can send it to an exchange. To this you, you’ll need to login to Independent Reserve (or whatever exchange you’re using) and copy the wallet address.

Image of the Independent Reserve Bitcoin Deposit Address for the accept crypto payments guide

Now you’ve copied the address, head over to CoinPayments and paste it into the ‘Bitcoin address or $PayByName to send to‘ field. Be sure to double and triple check you have the right address.

Image of the CoinPayments Deposit Address Field for the accept crypto payments guide

Once you’ve requested withdrawal, you may be required to confirm the transaction via an email from CoinPayments.

8. Record Keeping

Ah, the most exciting part of this guide. I’ve been putting this off because it takes the most brain power to articulate. Firstly, let me say this.

If you accept crypto payments need to be very diligent with your record keeping. Blockchain payments are permanent. Blockchain payments are immutable. You must do things correctly as early as possible, and consult with your accountant in doing so.

The best way to go about record keeping is to record everything in a simple spreadsheet. We have to do this because unfortunately full accounting suites like Xero do not have crypto integration yet. So, with that being said what are some of the thing you should record? Well, according to the ATO they require you to record the value of the cryptocurrency in Australian dollars. We go way above that by recording just about everything we can, just to be safe.

Information we capture

  • Date and time of transaction
  • Payment type and company it came from
  • The AUD amount at time of payment
  • The quantity of the crypto coin at the time of payment
  • YES/NO whether we converted the payment to bitcoin or not
  • The bitcoin quantity if it was converted and the conversion fee
  • An IN/OUT response if we send it to an exchange or wallet
  • Where the transfer came from, i.e. CoinPayments, and where it was transferred too, i.e. Independent Reserve
  • The transaction ID of the transfer
  • A YES/NO as to whether we sold it or not and the AUD price at the time of selling
  • The brokerage fee for the sale and the GST
  • The difference in AUD (minus brokerage fee) from the initial AUD we got paid in to the final sale amount. This is to record the capital gain or loss if there is volatility in the market.
  • A percentage difference to make it easy to quickly see if there was a loss.
  • Finally, a comment field to record any additional information on the particular transaction that would be helpful to our accountant.

As you can see we record a lot. We do this as its better to be safe and take the time to ensure all the correct information is captured. By no means is exact or is it the correct way of doing things, its just what we do. As I said above, you need to consult with your accountant or find a crypto accountant that specializes in cryptocurrency. If you are looking for someone, we recommend Crypto Accounts.

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Disclaimer

This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators’ websites before making any decision. Cryptocurrency Australia Media, or the author, may have holdings in the cryptocurrencies discussed.