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How to Setup your Crypto Back-Office for good

Crypto Custody, Crypto Payroll, Crypto Payments, Crypto Accounting, Crypto Reporting, and more areas need to be completely rethought in the context of Web3.

Are you starting a Web3 project or you’re a Web2 organization considering adopting Web3? What comes into mind for preparing the financial back-office?

Factors to Consider

There are nine essential factors to consider when setting up the back-office of a Web3 business or DAO:

  1. Security: Web3 companies must deal with sensitive information and financial transactions. So, it is crucial to have robust security measures in place to protect against cyber threats. This includes measures such as encryption, multi-factor authentication, and regular security audits.
  2. Scalability: As the use of blockchain technology and decentralized networks grows, web3 CFOs must bullet-proof their back-office infrastructure. Making it capable of handling increased demand when growth becomes crucial.
  3. Compliance: Web3 companies must comply with local and international regulations and laws. This includes compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.
  4. Integration: The back-office systems must be able to integrate with other systems such as accounting, inventory management, and CRM.
  5. Automation: Automating repetitive and time-consuming tasks can help to reduce errors and increase efficiency.
  6. Flexibility: The back-office infrastructure should be flexible enough to adapt to changes in business and technology.
  7. Data Governance: Web3 companies must be able to handle, store and process a large amount of data. This includes not only data from the blockchain but also other sources such as customer data and transaction data.
  8. Reliability: The infrastructure should be designed to ensure maximum availability and minimal downtime.
  9. Accessibility: The back-office systems should be accessible to all relevant parties, including employees, partners, and customers.

At Cryptoworth, we are helping clients grow from zero to millions of daily onchain finance transactions. We have learned that a Web3 company will need some of the same software solutions as traditional finance teams. These solutions include organization stacks, internal communication mediums, and ERP solutions.

The Main Ledger Setup

At scale, a Web3 company will need a main ledger software like any other traditional company. The main ledger would be in an accounting software or an ERP solution that the Web3 company implements. This software could be Oracle NetSuite, Quickbooks, Xero, and Sage Intacct to name a few examples.

Web3 companies often still need to interact with traditional financial systems. Especially, in order to pay employees, vendors, and other expenses as they scale.

A complete accounting solution would allow the the web3 finance team to track and manage these transactions. And more important, comply with financial regulations.

Additionally, having a clear and accurate record of financial transactions can help the company make informed business decisions. It also helps maintain transparency with stakeholders.

The Crypto Payments, Payroll Setup

Issuing cryptocurrency payments and cryptocurrency payroll is a whole different complexity on its own that many Web3 organizations struggle to address.

There are many solutions that have been developed to facilitate the ability for these organizations to pay bills and invoices in crypto assets as well as their employees and contractors in crypto assets, one well-established solution is Request Finance.

These are essential tools to have in your arsenal to streamline AR/AP workflows for crypto companies. One of the main things to consider when choosing a payments/payroll solution are the security of your wallets.

The Data Setup via a Crypto Data Software

The reality is that web2 and web3 do not integrate well due to fundamental differences in their design. Traditional tools like spreadsheets add a lot of complexity and friction to the finance teams, as the organization starts to scale. Month-end closing time can extend significantly if automated solutions are not implemented in day-to-day workflows.

Cryptoworth is a crypto operating system software that will automate all crypto-related (and fiat-related) back-office workflows.

Streamlining Back-Office Workflows for Smaller Organizations and SMBs

For smaller organizations and SMBs with very few fiat transactions, the crypto operating system software should suffice to streamline all back-office workflows. The solutions will be able to bring all crypto data and fiat data to a single source of truth in the most automated way possible. This would immensely speed up the month-ends for financial teams. As your organization grows, most teams realize that advanced controls need to be put in place. Interactions with fiat are unavoidable.

Integrating Crypto Data for Medium to Larger Organizations

For medium to larger organizations, the crypto operating system software should have the capability to consolidate all crypto data, process the crypto data to generate financial reports, and output the data to a traditional ERP or accounting system such as Netsuite or Quickbooks. Since this traditional software does not integrate well with crypto data, specialized software is needed to ingest, process, and output the data in a way the traditional software would understand. Often times this interoperability is enabled through API connections.

In order for the COS to be Web3 capable, all the following data sources must be available for ingestion.

  • Exchange data (e.g. Binance, Coinbase)
  • Blockchain data (e.g. Bitcoin, Ethereum)
  • Third-party platform data (e.g. Fireblocks, BitGo)

The ingestion of all the data sources that pertain to a Web3 company’s operation into a Web3 specialized software with accounting capabilities is a crucial step to convert the data into a format that would allow US GAAP and IFRS accounting principles to be met. Once the data is in a format that is compatible with the more fiat-focused accounting software, an API connection enables the data to flow from the sub-ledger to the main ledger with minimum manual work.

The Web3 Back-Office Setup

From our experience working with organizations ranging from successful startups to large well-established crypto organizations, a full-fledged back-office is made up of:

  • a main ledger solution,
  • a crypto operating software solution, and

CFOs and accountants starting their journey in Web3 or a new Web3 organization can combine some battle-tested solutions for the main ledger, Cryptoworth for the crypto operating system, and Request Finance for crypto payments.

Sync all the crypto data to any ledger in a heartbit

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