The use of Cryptocurrencies and ERP systemcloudsiteadmin
Digital currency in general is an evolving phenomenon that may have major impact on global commerce. The new ability to instantly move value to and from customers, partners and employees outside of established providers (like banks and credit card companies) suggests opportunities for those organizations seeking to lower transaction’s cost, extend reach and minimize fraud.
Organizations may benefit from the integration of cryptocurrency within ERP systems, as it would enable them to complete transactions faster and at reduced costs and pay for products and services they consume in more accurate processing. Also, as companies may hold part of their portfolio in cryptocurrency, they can trade in crypto and maintain their liquid funds for other actions.
Blockchain Technology and ERP System
Blockchain is a private, secure network that uses cryptography to keep exchanges secure, provides a decentralized database or “digital ledger” of transactions that everyone on the network can see. This network includes a chain of computers that must all approve an exchange before it can be verified and recorded. Post verification it is very difficult to change or to hack this exchange, it provides full transparency and visibility.
Blockchain technology may have an important role in the development of companies’ supply chains and in ERP systems. In order to have a fast-working system, companies would have to integrate Blockchain into their ERP systems. As Blockchain enables each transaction to be recorded, it can be leveraged when working with digital currency.
Many countries are starting to develop regulations for Blockchain, which are mostly limited to digital currencies. The digital currency market is the main concern and how it affects international transactions, as there could be significant disruption in global financial markets if this activity is unconstrained.
Bitcoin as a Payment Method
The key concern of organizations that study the option of accepting digital currencies is the valuation risk. Due to currency exchange rates and additional reasons such as blockchain processes’ changes and speculations on Bitcoin split, the value of Bitcoin is changing wildly over time. Therefore it is necessary to adjust the value of cryptocurrencies before paying. The price of Bitcoin in 2015 was relatively low at $170 a unit, but it has increased rigorously in the past couple of years reaching over $28,000 a unit by the end of 2020.
There are Bitcoin merchant payments processors who enable a business to accept digital currency but receive dollars or local currency with an effective solution for the valuation risk problem. No Bitcoin is actually being held by a business. According to this “Payment Method” model the business can refer to the digital currency as another payment type such as “credit card”/“cash”. This model includes a payment processor backend which can be compared to PayPal payment model. According to accounting procedures an upfront liability may be documented before shipping the product or sustaining the payment of an existing receivable.
Bitcoin and NetSuite
NetSuite has included Bitcoin as a Payment Method and a form of currency, not only for company operations but also for eCommerce.
Due to the variances among countries, the legal use of Bitcoins is still uncertain and should not be treated by the system as normal currency. From the legal aspect, Bitcoin is a form of currency but it is listed as an asset. There aren’t many customizations necessary in NetSuite to comply with legal and accounting requirements. Main set up is duplicating the COGS, Assets and Income accounts for Bitcoin to minimize influence on the monthly P&L. Reports will merge the two COGS accounts mapped this way.
Using Payment Processors
It seems that although you can make transactions with Bitcoin with no third party payment processor, using an established payment provider is more effective since it’ll minimize operational, technical and regulatory risk.
Some Bitcoin payment processors offer ready-to-go integrations with popular ecommerce applications. Some ERP systems, such as NetSuite, offer extensive integrations with ERP systems, meeting both the Payment Method and Foreign Currency requirements. All payment processors have a proprietary API to allow designing specific suitable logic and data integration.