Bitcoin has gotten a lot of media attention lately related to both its growing popularity as a payment solution and the rise and fall of its value price. Below we explore Bitcoin and the implications of it as it pertains to small businesses. In addition, we offer a tips for businesses who want to start accepting Bitcoin as a viable payment option.
What is Bitcoin?
Bitcoin is a digital currency in which transactions can be performed without the need for a central bank. Bitcoins can be purchased on an exchange and are stored in a digital wallet in the cloud or on a user’s computer. The owner of the wallet is provided a private key which is required to prove ownership. If a private key is lost, the user cannot prove ownership by other means. The coins are then lost and cannot be recovered.
While bitcoin is not yet recognized as a “currency”, it is similar to accepting payment in other forms, such as cash, gift cards or foreign currency. Bitcoin offers an anonymous way to pay for goods and services, as payments transacts through a private online account. Transactions are recorded on a public log but names are kept private, and instead each transaction is tied to its digital wallet id.
Tips for Businesses Who Accept Bitcoins
- As your business initially starts to accept bitcoin, you may find that the easiest way is to accept it only for the purchase of gift cards, and then require the gift cards to be used for actual purchases of goods or services. By doing it this way, you can use established accounting practices to track receivables.
- If you mail invoices, you may want to indicate that you accept bitcoin on the invoice itself, along with instructions to access the unique bitcoin address to which to send payment. It is recommended that you change this address with each new invoice for tracking and security purposes.
- In order to reduce the risk of fraudulent use of bit coin, avoid letting people try to type Bitcoin addresses off payment stubs - instead, force people to get the full Bitcoin address from your website via secure SSL.
- The value of a bitcoin can fluctuate. Therefore, it is recommended that you disclose payment terms on your invoice clearly and specifically - For example, if your invoice is for $100 and bitcoins are currently worth $1.24 each, your invoice might suggest that it can be paid in full "with a payment of 80.65 BTC if paid by (date)”.
- Bitcoin Merchant Services are also available that will assist in processing a transaction. A list of options can be found here.
While it may take some time to become a common form of payment given the reluctance of banks to adopt it and the fraudulent activity that surrounds it, Bitcoin remains a viable payment option of the future. As such, it’s important for small businesses to be at the forefront of this technology in order to remain competitive in the marketplace.
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