Fintech company Mercury has grown at lightning speed by prioritizing technological innovation. But this rapid growth created a complex challenge for controller Christine Andrews. Learn how Neo.Tax's AI solution simplified the process, created a more accurate filing, and saved her and Mercury's team of engineers weeks of valuable time.
Summary
Saved Weeks of Engineering+Accounting Time
- Eng Reviewed R&D in <1 hr each. No meetings, no calls required
- “I can’t imagine doing the R&D tax credit manually”
“More accurate, higher quality” Study vs Top 10 CPA Firm
- Rigorous Narratives for all 50 projects
- R&D Credit done in <1 month total
Confidently Claimed Larger Credit
- Increased R&D Credit YoY
- “The final study was over 500 pages. That’s a lot of support. That’s a lot of backup. And I think that’s exactly what you need for the IRS”
Smooth Financial Audit
- Auditors loved the ticket-driven method + granularity
- “Low burden…went smoothly because we had the backup”
Detailed
The Challenge:
Fintech company Mercury has grown at lightning speed by prioritizing technological innovation. Mercury provides startups and ambitious companies banking* and software to power their financial workflows. Mercury continues to create new products but this rapid growth created a complex challenge for controller Christine Andrews.
She needed to scale their R&D credit and ASC 350-40 processes to fit the company’s trajectory without burdening the engineering team that is driving the innovation.
On the tax side, Mercury claimed a substantial R&D credit, but Christine wanted stronger documentation backed by granular data to make her confident the credit would withstand audit. On the accounting side, Mercury needed to start reporting on internally developed software (ASC 350-40) at a detailed level for their first year of audited financials.
Both processes needed input from Mercury’s engineering team, but Christine wanted to improve on the traditional approach of creating separate, mostly redundant processes that wasted engineers’ time.
“We wanted something where there’s actual supporting documentation rather than trying to guess someone's percentage of time,” Christine says. “But also we didn't want to go the direction of time tracking either.”
At previous companies, Christine found the traditional approach of quarterly reviews with product leads inefficient and inaccurate. It took too many meetings to get everyone on the same page and the product leads often lacked detailed context about what engineers worked on.
“For both capitalized software and the R&D tax credit, it can't just be accounting making assumptions,” she says. “You really have to get the data from the actual managers who truly know and oversee these projects and individuals.” She wanted a process that incorporated real-time data that was convenient and easy to use.
The Solution
Neo.Tax’s system for automating the R&D credit & ASC 350-40 from Mercury’s R&D team’s existing data — saving time and money and creating audit-ready substantiation
Christine partnered with Neo.Tax to solve both problems at once. Using NeoTax’s unified project system and Linear integration, Mercury leveraged their project management data to streamline both the R&D credit and ASC 350-40 processes.
First, Christine used Neo.Tax to go back and identify all their capitalized projects for the prior year and calculate time spent per project for each engineer. For example, Neo.Tax identified Mercury’s newly launched Personal Banking product as a R&D project and the engineers who worked on it with an estimated percentage of time.
Then, Mercury leveraged Neo.Tax’s unified system to complete their R&D credit process–in record time! Christine used Neo.Tax’s system to condense the granular capitalized software projects into R&D credit projects and to generate the detailed documentation to support their qualification.
“The ability to do granularity for cap software and then copy that over to leverage the work, but at a higher level for R&D tax credit, made it really easy to use,” she says.
Results
Saved Weeks of Engineering+Accounting Time
Christine estimated it took each Engineering Manager less than an hour to review. “We got really good feedback from engineers who have gone through this at prior companies, and they were very thankful with how easy it was to use,” she says. “I did not have to have one meeting, one phone call with anyone.”
Since the Engineering team had already reviewed their project time for ASC, the R&D part was a breeze. “Again, it probably took them less than an hour,” Christine says.
Smooth Financial Audit
The granular projects and level of detail made for a smooth audit too. “[Our auditors] really liked that it was based on the tickets and that there was a clear calculation that they could follow.”
“More accurate, higher quality” Study vs CPA Firm
NeoTax’s AI system automatically created a detailed 500-page study, substantiating the four-part test for each project from Mercury’s linear tickets.
“Having Neo.Tax AI do the work and then me review really reduces my time and also creates a more accurate and quality product,” Christine says. “When we got the final PDF, it was over 500 pages. That's a lot of support. That's a lot of backup. And I think that's exactly what you need, when you have over 200 people and over 50 projects, to really have that level of granularity and backup across all the four requirements for R&D tax credit.”
The Takeaway
Christine sees these benefits only growing quarter after quarter as Mercury continues to scale. “Having myself, our engineers, and the product teams use the same system throughout the year for cap software, and then annually for R&D tax credit, and not changing the process, besides getting even more accurate, creates efficiencies,” she says. “Neo.Tax really understood what our problems were and solved them.”
*Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust, Members FDIC.