Cryptocurrency and Inventory Management

March 19, 2018
Bitcoin, cryptocurrency, and inventory management, Fishbowl BlogBitcoin is all the rage these days. With cryptocurrencies suddenly coming into their own and becoming hot investments for consumers to speculate on, many online retailers and other types of companies are beginning to accept some of them as a form of payment for goods and services. Here is a recently compiled list of companies that accept Bitcoin, which is in an infographic put together by 16best.net. All of this begs the question, how does cryptocurrency affect inventory management? Is it wise to accept Bitcoin as payment in transactions with your customers? Let’s explore that question as we discuss the value of cryptocurrency in inventory management.

Cryptocurrency vs. Fiat Money

Bitcoin, Ethereum, Ripple, Cardano, Litecoin, and every kind of cryptocurrency (or altcoin) is not based on a gold standard or anything for that matter. Of course, neither are the U.S. dollar, euro, yen, and any other fiat money. The difference is that those currencies are ostensibly connected to a government entity, and so they rely solely on the full faith and credit of the nations that issue them. Money is a tricky thing. Because it is not usually connected to a physical asset anymore, such as gold, it is just worth what people believe it is worth. There is no objective value. The only reason a dollar bill isn’t just a piece of paper is that individuals, businesses, society, and authorities agree that it is worth something.

Wild Fluctuations in Value

Cryptocurrency is not connected to anything physical or governmental. It is a digitally created asset that is protected by the integrity of its cryptography and the limited quantity that is available for people to obtain and use. There is nothing wrong with that. This is not a declaration of its inferiority, but simply of its differentiation from traditional currency. It’s great to see innovative minds coming up with a new tool of exchange for the Digital Age. The only problem is that, by its nature as a decentralized currency, the value of cryptocurrency has a tendency to fluctuate wildly on a daily basis. Exchange rates between most countries’ currencies fluctuate slowly and so it’s relatively easy to keep up with the changes as you perform multi-currency conversions in sales orders, purchase orders, etc. and store that information in an inventory management solution and an accounting solution. But cryptocurrency is different.

Good for Inventory Management?

Let’s put this in practical terms. For example, a customer could put an item into their shopping cart, get distracted doing something else, and complete the purchase an hour later. But by the time the transaction is processed, the value of the Bitcoin could have climbed or fallen enough to cause a problem when it comes to the price paid. You could find yourself constantly refunding sizable amounts of money or requiring your customers to pay more money to complete their purchases after the fact. This can really mess with your financial data and create an unpleasant experience for customers. What do you think? Is cryptocurrency a positive thing for inventory management and accounting or is it more trouble than it’s worth?