For those in the know, cryptocurrency is the future of investments. Digital assets have already begun to carve out a place in the world economy and are only expected to become more commonplace in the years to come. However, for all the talk of cryptocurrency’s bright future, one area where it still lags behind traditional investments is financial management and accounting compliance standards. In order to make sure your crypto portfolio is GAAP compliant, you need a financial management system that can handle the unique complexities of digital assets. Here’s a look at why crypto investors need a financial management system, like NetSuite, and how that can help to ensure GAAP compliance.
What is GAAP?
GAAP stands for Generally Accepted Accounting Principles. These are the standards that all public companies must use when reporting their financials. While private companies are not legally required to follow GAAP, most do so anyway in order to give their investors accurate and consistent information.
There are a few key things that GAAP compliance requires. First, all companies must use accrual-based accounting, which means that they record revenue and expenses when they are earned or incurred rather than when the money is actually received or paid. This provides a more accurate picture of a company’s financial health.
In addition, GAAP compliance requires companies to use double-entry bookkeeping. This means that every transaction must be recorded in two separate accounts. For example, when a company buys digital inventory, it will record a debit in the Inventory account and a credit in the Cash account.
Lastly, GAAP compliance requires companies to prepare financial statements on a regular basis. These statements must include a balance sheet, an income statement, and a statement of cash flows.
Why is GAAP Compliance Important for Crypto Investors?
There are a few reasons why GAAP compliance is important for crypto investors. First, it ensures that your portfolio is being accurately valued. If your portfolio contains a mix of traditional investments and digital assets, you need to make sure that the value of your digital assets is being correctly reported and accounted for on your financial statements.
Second, GAAP compliance helps to ensure that your portfolio is diversified correctly. If all of your assets are valued using different accounting principles, it becomes very difficult to tell whether or not your portfolio is properly diversified based on industry diversification targets. By having a financial management system for Crypto companies that can account for your digital assets using GAAP, you can be sure that your diversification reporting metrics are accurate.
Third, GAAP compliance gives you the peace of mind that comes with knowing your portfolio is being accurately reported. If you’re ever audited by the IRS or other regulatory body, you’ll be able to rest assured knowing that your financial statements are accurate and compliant with GAAP.
Challenges of Digital Assets for Accounting and Treasury Management Teams
Whether you are a private investor or a venture capital firm, the first and most obvious reason why crypto investors need a financial management system is because digital assets are not like traditional investments. Unlike stocks or bonds, which have been around for centuries and are well-understood by the financial world, cryptocurrency is still a relatively new phenomenon. As such, there are a lot of unique complexities that come with investing in digital assets. From managing multiple exchanges to dealing with volatile prices, crypto investors have their work cut out for them when it comes to financial management.
A good financial management system, Like NetSuite for Crypto Companies, should be able to handle all of these different complexities in one place. It should also be easy to use and understand yet powerful enough to give you the information you need to make informed investment decisions. In addition, the system should be flexible enough to adapt as the cryptocurrency market evolves over time.
Bridging the GAAP Gap
Another reason crypto investors need a financial management system is because it can help ensure continued compliance. While not all crypto investors are currently subject to GAAP compliance, that could change in the future as digital assets become more mainstream. If and when that happens, having a financial management system in place will ensure that you are able to meet all of the necessary reporting and accounting obligations.
NetSuite for Cryptocurrency Companies
For cryptocurrency investors who need a financial management system that can help them overcome the unique challenges of digital assets, NetSuite is an excellent option. NetSuite is a cloud-based software solution that gives users access to powerful accounting, invoicing, and treasury management tools. In addition, NetSuite’s software is designed to be easy to use yet flexible enough to adapt as the needs of your business change. If you are looking for a financial management system that can help you overcome the challenges of digital assets and ensure GAAP compliance, NetSuite is an excellent option.
Cryptocurrency is still in its early stages and lags behind traditional investments in many ways. One area where this is especially true is financial management. In order to make sure your crypto portfolio is GAAP compliant, you need a financial management system that can handle the unique complexities of digital assets. A good system should be easy to use and understand yet powerful enough to give you the information you need to make informed investment decisions. In addition, the system should be flexible enough to adapt as the cryptocurrency market evolves over time. By using a system like NetSuite, you can help ensure GAAP compliance and rest easy knowing your investments are correctly accounted for.
Zanovoy is a leading New York-based NetSuite partner, specializing in serving the needs of cryptocurrency, NFT and blockchain companies. We have a deep understanding of the financial management challenges that come with creating, owning and managing a portfolio of digital assets, and our team is ready to help you overcome them. Contact us today to learn more about how we can help you streamline your financial operations and ensure you’re ready for changes that are inevitable in an increasingly volatile crypto-market.