Best Practices for Accounting Firms to Onboard Crypto Clients

Crypto clients are often the most challenging (and rewarding!) customers to work with in the sphere of accounting firms. As any good crypto accountant knows, not all the data is simply “on the blockchain,” fashioned in a delightful, easy-to-read format that can be uploaded into Quickbooks. There are often hidden wallet addresses, random DeFi transactions, personal and business commingling and of course, some offshore activity. Here at Hash Basis, we thrive on this complexity and love fitting all the puzzle pieces together into a snug, accurate view of the financials.

One of the most important parts of running a crypto accounting practice is having a fleshed-out strategy for vetting and onboarding clients. Some potential clients are a can of worms and you might not want to work with them. It’s important to figure out what your ideal crypto client is and build a strong pipeline, sales process, and onboarding flow to attract and retain those star customers. 

In this article, we’ll be sharing the Hash Basis recipe for onboarding clients, from the initial sales call to getting them into a “steady state” as a signed customer.

⚡Part I: Sales Cycle with Potential Lead

A successful onboarding doesn’t start once the contract is signed - it starts way before that, from the first interaction the potential customer has with the accounting firm. Everything at this initial stage is crucial, from the response time to emails to showing up on time to the first call. The lead has to know that you’re a solid operator, detail-oriented, and someone who follows through - three qualities that every customer wants their accounting firm to have (who ever wanted an accountant that was disorganized and late?). 

I treat these initial calls as a doctor would when seeing a new patient. I diagnose the health of their financials (especially their crypto accounting activity) and probe to uncover the pain points in their existing accounting setup. It’s also critical to do research before coming to the call (i.e. perusing the lead’s website, brainstorming questions, checking them out on LinkedIn, etc). I don’t go overboard on the sleuthing - it’s just basic due diligence that any professional has a responsibility to do.

I start off by asking the lead a general question - “so, tell me about your accounting history? What’s working and what’s not?” I’ve found this question to be a useful springboard into the inner financial workings of a new client. I’m encouraging them to share as much as possible so I can construct a mental model of their books and processes. Leads love chatting about their startup and roles - and since startups typically don’t have accountants or CFOs, I’m talking with operations folks and CEOs. In about ten minutes, I catch glimpses into another company’s world and how money flows in and out. After discussing their accounting history, I come in with focused questions such as:

1. What’s your entity structure?
2. Where are you incorporated?
3. Have you raised any funding?
4. What's your business model?
5. What are your token flows? (i.e. how do tokens come into and out of your company)
6. What chains are you on?
7. What's your on-chain transaction volume?
8. What's your accounting tech stack? Any crypto subledgers?
9. Will you have a token? Do you have any offshore entities?
10. Is there any commingling between business and personal activity?

These questions help me gauge the client's financial sophistication and intricacies, which translates to how much effort on our part will be required. 

In the first call, my goal is to get a sense of:

1. What product or service the company provides, 
2. How money flows throughout their business, and 
3. The degree of accounting “cleanup” they need. 

With startups, it’s rare to have spotless books and reconciliations (if they exist at all), so a lot of work starts from scratch. There are a few follow-ups after the call:

1. Sending an NDA
2. Getting access to their ERP (usually Quickbooks) and crypto subledger (if they have one)
3. Reviewing any other docs the client sends over
4. Providing a quote
5. Another follow-up call to dig into any confusing areas, discuss pricing, etc

[fs-toc-h2]A Note about Subledgers

If a potential client has crypto activity but doesn’t have a subledger yet, we’ll help them select and implement a subledger that fits their needs. If the client only has a few transactions that are relatively simple (i.e. sends and receives), we’ll implement a solution like Koinly that’s reliable and inexpensive. For more complicated crypto transactions, we’ll refer them to our enterprise subledger partners like Bitwave, Integral, Taxbit, etc. 

As we’ve written about before, choosing the correct subledger is paramount, and is the difference between clean, timely books and month-end closes that feel like a slog. Choose wisely!

Assuming the potential lead signs up with your firm (yay! 🎉), the lead is converted into a client and enters the next phase in the sales cycle…

✨ Part II: New Customer Onboarding

As soon as that contract is signed, the potential lead converts into a customer - and now begins the real work! Most of our customers sign up for our monthly accounting and tax package, so a metric of onboarding success is how quickly we can get the new customer into our month-end close flow. 

A big factor here is the current state of their books - does crypto need to be fully overhauled? Does the fiat activity need reconciling? Did they file their 2023 tax return? Our team spends 3-4 weeks laying the groundwork for successful closes and making sure everything reconciles to the dollar. Example files we build are:

• Bank reconciliations
• Depreciation and prepaid schedules
• Credit card reconciliations
• A historical reconciliation of all crypto activity to the current date

An accurate chart of accounts that depicts their crypto and fiat activity realistically (I always add “Gas Fees”, “Crypto Assets” and “Realized Gain/Loss on Crypto Transactions” accounts - Refer to the article on ‘How to Prepare a Crypto Chart of Accounts’)

[fs-toc-h2]Building a Token Flow Diagram

On the crypto side, we use context from previous calls to build out a token flow diagram/narrative. We need to understand every point where crypto touches the business, from revenue generation (i.e. staking, mining, receiving invoice payments in stablecoins, etc) to treasury management and offramping to fiat. We gather a list of products used such as Fireblocks for wallet management, Rain Cards for crypto debit cards and Kraken for trading. We examine the records these centralized players provide since they’ll plug into the crypto part later. A detailed token flows diagram that includes looks something like this:

We also request a comprehensive wallet address and exchange list from the customer and do our own research if the customer uses obscure protocols or applications. For example, we had a customer who deployed vesting contracts on CELO, so we spent hours researching the smart contacts and testing them out ourselves. This tailored knowledge is so important to onboarding crypto clients - if you don’t understand what they’re doing on-chain, the accounting will likely be incorrect.

[fs-toc-h2]Subledger Implementation Good Practices

Once we digest their crypto activity, then we dive into the crypto subledger and either review past work or implement the subledger from the beginning. It’s key to have accurate subledger data that ties to the general ledger. Our process involves the following steps:

1. Ensure the client has sent all wallet addresses
2. Port wallet address data into the subledger via syncing or manual uploads
3. Double check ending token balances per the subledger tie out to on-chain (via screenshots, node queries, etc)
4. Review all pricing for accuracy and reasonability (i.e. USDC should always hover around $1)
5. Check the realized gain/loss numbers and ensure all reports tie out to the ending cost basis
6. Make any necessary adjustments so the ending cost basis per the subledger ties out to the general ledger

Luckily on the crypto side, we don’t need access to a menagerie of software applications (unlike for fiat, where we need special “accountant access” for payroll, banks, credit cards and equity). Armed with a subledger and public addresses, we can run wild with the reconciliation and only approach the client when we have specific questions. I’ve learned that clients dislike being dumped in a pile of transaction hashes and then asked to provide context for each one in a spreadsheet (*snore*). Instead, we try to detect a pattern with any unknown transactions and cover our questions via a call or Telegram message.

Once the pennies are reconciled and the tokens are counted, we present the cleaned financials that tie back to the support we built. It’s such a satisfying experience, seeing how our library of CSVs and schedules all lead to the general ledger 😌. With the historical cleanup done, the client enters the steady state of month-end close, where it normally takes ~5 days to reconcile everything for the previous month.

[fs-toc-h2]Documentation through SOPs

An overlooked part of the client onboarding funnel is documenting the client’s accounting flows and monthly procedures. At Hash Basis, Standard Operating Procedures (SOPs) are our backbone for scaling and onboarding new team members, and we create customer checklists and Loom videos that walk through how to complete each process in detail (eg. crypto, banks, credit cards, prepaids, etc). This is an essential part of team training, but it also helps solidify our learnings. Every customer is unique, and it’s difficult to “copy and paste” a methodology for crypto like you can for a Mercury or Ramp reconciliation.

‍Crypto accounting is a bespoke art that requires patience, curiosity, and care. The crypto accountant needs to be continuously learning about changes in the crypto regulatory and tax landscape, as well as how to use/adapt new accounting tools.

😃 Part III: A Happy Customer

If parts one and two are done gracefully, the client relationship is poised to flourish. Let me be clear though - successful client onboarding doesn’t mean “Set it and forget it!” Once the schedules are made and books reconciled, you have to repeat these motions monthly and check-in with your clients. Let them know about the new cost basis by wallet and reallocation rules. Invite them to the latest webinar your firm is hosting about Form 1099-DA. Always deliver the best work possible because the client deserves it.

And that’s the Hash Basis client onboarding philosophy! If you have any questions or thoughts, feel free to reach out to us at hashbasis.xyz