One Less To-Do: Neo.Tax Automated Capitalization Milestones

We've heard over and over from accounting teams that one of the most tedious and frustrating parts of the software capitalization process is identifying the projects to capitalize and the capitalization milestones. They try to implement a tracking process, but it puts a huge burden on engineering to tag and evaluate projects, which never happens consistently. At audit, the accounting team is left struggling to back up their capitalization decisions.

If you have 100 engineers and need to interview even 20% of them to retroactively identify capitalization milestones, that’s 20 hours of high-value engineering time lost. Add in 40+ hours from your accounting team to translate that into audit-ready documentation, and you're looking at a full week of effort per cycle. Now multiply that across dozens of projects, and the cost and frustration grows exponentially. For innovative companies, the problem isn’t just tedious—it’s unscalable.

So, our talented engineers and data scientists got to work on creating an AI tool to automate the process. This week, we’re excited to announce the release of Automated Capitalization!

The Problem:

ASC 350-40 asks companies to determine what software projects to capitalize based on development phase milestones. The traditional solution created many pain points for companies. Because the development phase is hard to pinpoint and define, controllers and accounting managers lean heavily on after-the-fact interviews with engineers. These rough estimates to identify milestones are a pain for engineering teams and are far from exact.

The process becomes a top-down retrospective where capitalizable projects are missed and the justification for auditors becomes fuzzy at best. 

The Neo.Tax Solution

So, what does this mean for your company?

1. Streamlined Capitalization Decisions, at Scale

• Neo.Tax now automatically evaluates every project against ASC 350-40 guidelines
• This removes the burden off Engineering to retroactively identify milestones
• For companies working on hundreds or thousands of projects, Automated Capitalization is the only way to capitalize at scale.
• And the AI scales with your company: no accountant can manually track software capitalization for 200+ engineers, but Neo.Tax’s model can.

2. Consistent Capitalization Milestones

• By automating capitalization milestones based on the actual contemporary data, Neo.Tax creates a consistent output rather than a patchwork dataset created by retrospective interviews or inconsistent labeling. 

3. Audit-Ready, Automatically 

• Neo.Tax’s model delivers evidence for the capitalization milestones, which are consistent across every project.
• That means you have audit-ready support for the capitalization status for each project, and reasoning you can show the auditor right at your fingertips.

No more inconsistent tracking. No more after-the-fact engineer interviews. No more guesswork when answering questions for an auditor.

How We Automated Capitalization Milestones

That’s why we’ve built automation into the most tedious parts of capitalization, like identifying eligible projects and key milestones.

Our model is trained on the ASC 350-40 guidelines and a comprehensive dataset of tens of thousands of ASC projects hand-reviewed by expert accountants. For each project, it evaluates every underlying ticket in your existing project-management data against the guidelines and determines whether it’s Capitalizable or Not Capitalizable. 

If the model determines that a project is Capitalizable, the AI evaluates the tickets in the project to determine when the project has reached the development phase and when the project is likely released/in service, based on the share of maintenance/operational tickets.

Best of all, our model delivers a paragraph output explaining its reasoning, so your accounting team can review the recommended results, inspect the reasoning, and adjust as needed. 

So, book a meeting and find out what Automated Capitalization can do for your company!