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Time for a change?

Posted by Dave Bull at   7:39 PM, March 15, 2014 [Permalink]

The short story - we are now accepting Bitcoin as payment for our two woodblock print subscription sets. Subscribers to our very popular Ukiyoe Heroes Portraits and Chibi Heroes series can now make their payments that way if they so choose:

The long story ...

We're well into March now, and as always at this time of year, tax matters raise their head! Along with our steadily increasing business over the past couple of years has come a commensurate increase in our expenses, of course, and keeping the two from 'colliding' is not an easy task!

Here at Mokuhankan we did turn a small profit last year. I say 'we', although from the point of view of the tax authorities there is no 'we' about it; the business here is organized as a 個人事業 (kojin jigyo - personal enterprise), which simply means that every part of it is my own personal affair. All income is treated as my personal income (against which many expenses can be deducted, of course).

The left-over money at the end of the year is the amount that I then pay personal income tax on, and this time around, as that was a very small amount, my taxes were also very light. This will have an additional benefit over the course of the coming year, as many other expenses 'cascade' from this tax assessment: my medical insurance premiums will be very low, as will be my prefecture and city taxes. (And if I still had children in civic day care, their fees would be negligible; fortunately those days are long past!)

But having only a very small profit isn't really good news of course. I work insane hours, and to find that there was so little left at the end of the year (and I take no salary) is a bit disheartening. So I've been going over the financial statements to see if there are any expenses that seem like they could be reduced.

The complete statements will be coming up in a post later, but for now, here's one small clip from the yearly expense summary:

The figures are yen, and the highlighted column is 'Bank", and contains the amount I paid out in money transfer fees over the course of the year, to both local banks and to Paypal. In US$ it came to nearly eight thousand dollars, approaching 5% of our overall income.

Now considering what I get for those fees - easy access to money transfers in small amounts from customers all over the planet - I'm not really complaining. Go back around ten years or so, and such a thing was inconceivable for a small business person like me here in Japan. Typical bank transfer fees were in the $50 - each - range.

But that was then, and this is now. Paypal is charging me a 3.9% fee on every transaction, and then hitting me with a 2% exchange premium over and above the standard interbank exchange rate every time I 'bring money home' into my own accounts. 6% is too much, and it's time to see how that can be reduced.

But what other methods are there that enable one to move money around the planet easily and quickly and yet incur only small transaction fees? Well, how about this one?

Yes, Bitcoin. This has been in the news a lot recently, mostly 'scare' stories about hacking, thievery, and the chaotic volatility of this new pseudo-currency. I have been following news about Bitcoin for some time now, wondering - along with everybody else - whether or not it will develop enough traction to establish itself as a major factor in the way that people make transactions with each other.

I have been particularly impressed with what has happened over the past couple of weeks, following the collapse of one of the major exchanges dealing with Bitcoins. Namely, next to nothing. What could have been a disastrous blow to the new 'currency' seems to have been taken in stride; it seems as though the community is now wide and deep enough to handle such inevitable events without major damage to the overall structure of the system.

So I think it's time to give this a try, and last night I put my programmer's hat back on, set up a Bitcoin wallet, and interfaced it with my bookkeeping system.

When a subscriber has a payment due, their account page will show an option to make remittance through the Bitcoin system:

Depending on what kind of 'wallet' they are using, they can either click the QR code, or scan it with their mobile, to make the payment instantly and effortlessly.

Now having a fee-less (nearly) system of moving 'money' around the world is all very well, but accepting Bitcoins does come with other issues: they are very volatile, with the value changing quite dramatically sometimes day to day, and they of course may not actually survive in the marketplace, perhaps eventually becoming completely worthless.

Well, I don't intend to be doing much speculating with this; I'll accept transfers, and then cash them out to my local currency as soon as is practical. This should minimize my risk on both counts ...

In any case, I can't really just do nothing. The 6% Paypal fee is far too high, traditional banks are no help at all, and I would also like to do everything I can to help get this new exchange medium up and running properly. I have no idea just how many of our subscribers will use this facility - and perhaps it might even help bring in new ones - but there is only one way to find out!




Added by: Dave on March 15, 2014 8:57 PM

A couple of things I didn't mention in the main story: I have programmed this to include a 'kill' switch, and if there should turn out to be some reason why it is no longer advantageous to accept such payments, I can turn it all off at the touch of a button. And although I can't control the overall volatility of the Bitcoin value against other currencies, I can protect myself against paying too much for them; my scripts 'watch' the exchange rates, and will automatically turn this off if they detect any extreme uptick in Bitcoin prices (the last thing I want to be doing is 'buying high, and selling low ...') especially while I'm asleep here in Tokyo!

Anyway, I think I have protected myself; we'll just see how it goes ...

Added by: Anita Cage on March 16, 2014 5:56 AM

I've always been in favor of your raising prices and/or adding a handling fee to cover such things as the cost of Paypal. You have such concern for your collectors but, especially with these new series, raising prices or adding a fee to cover costs would be easily accepted. It bothers me a lot that you worked so hard and at such a high level this past year for an inadequate profit. I know you were investing in this new venture but you must treat yourself a bit better, I think. You already give great value, we do not need you to sacrifice 'a pound of flesh.'

Added by: Dave on March 16, 2014 9:42 AM

And, it has started ... the first remittances this way came in within the first couple of hours of going 'live'; so it seems like this might indeed be useful to the subscribers!

Added by: Dave on March 16, 2014 5:29 PM

sacrifice 'a pound of flesh.'

Did I emphasize too much the 'smallness' of the profit? Perhaps ... But look at it the other way - there was a profit! And for somebody working in this old-fashioned field, with its insanely difficult labour problems, I think that's an achievement! I didn't mean to be crying the blues again ...

I'm quite happy with the way things are going overall, and I'm certain that with better management, we could get this thing onto a much more stable footing. Just when and how that change is going to happen seems to be beyond me!

Added by: Barbara on March 17, 2014 1:22 AM

What if you had a bank account in the US or Canada and just transferred the money when it became significant?
I can see the pros and cons of this and am sure you have considered it...
I too think you can just add a handling fee...everyone in the world does this, except you!

Added by: Dave on March 17, 2014 7:33 AM

What if you had a bank account in the US or Canada ...

I do have a US$ account over there, but it doesn't help me for most transactions. Paypal will not let a Japanese resident connect to any bank account (no matter where it is located) that is not denominated in yen. They claim that this is forced on them by Japanese banking regulations - which may be true or not, I can't tell - but this is not negotiable.

But clearly there is change on the horizon; Paypal is now being chased by Square, who are offering a fee lower than that 3.9%, but who can also not help me with non-yen transactions, as they are hamstrung by the same regulations. And I have even seen a number of rumours to the effect that Apple is considering a tie-up with Paypal (or buying them outright), incorporating their services into the latest and greatest iPhones ...

I'm actually in a fairly precarious situation, with something around 95% of my income coming through that one processor - Paypal - and am thus completely dependent on their whims, policies, and interpretations of the regulations.

So yes, you can understand why I an interested in exploring this new option!


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