Tax season stress-test: How ready is your startup’s financial stack?

Before you know it, it’s going to be tax season (again). Like an annual stress test for your business’s financial systems, tax season can uncover disconnected tools and inefficient workflows. Having a thoughtful, modern finance tech stack reduces risk, simplifies reporting, and sets your startup up for success year-round — not just at tax time.

Before the tornado of tax season begins, take some time to assess and upgrade your finance tech systems so you can avoid the pain later on. With smarter tooling, you’ll be able to sidestep chaos and have clear visibility into your company’s finances.

In this article, we’ll show you a helpful framework for ensuring your finance tech stack is tax-season ready, along with some red flags and mistakes that can upend financial clarity. By the end, you’ll know exactly how to make your financial stack work with you, not against you.

If your startup has accumulated tools as it’s grown, without a clear plan in place, you may have a messy mix of systems, instead of a clean, connected tech stack. So, how do you know which situation you’re dealing with and how it will impact tax season? 

Tax season may be difficult for your company if:

• You’re mired in endless manual processes, such as downloading .csv files from one system and uploading them to another system.
• You have a tangle of different systems that don’t work well together.
• You’re not quite sure how much you’re spending on your financial stack, or why.
• You’re seeing inconsistencies in the financial data across your systems.

To make tax season less painful, you’re going to need a well-connected, transparent system that generates clean data and keeps your accountant (or finance team) happy. Next, we’ll show you exactly what you need to make that happen.

If you find yourself asking, “What tools should I include in our finance tech stack so that tax time runs more smoothly?,” you’re in luck. These key components of a tax-ready startup finance stack will make your life exponentially easier.

Digital banking

Your digital banking provider is the foundational data source for your business. So, you’ll want a provider that offers clean exports, auto-categorized transactions, startup business credit cards, and direct sync to accounting tools. A favorite of startups? Mercury.

Bookkeeping or accounting platform (with tax filing)

Your bookkeeping or accounting platform is the system your accountant will use to file your taxes. So, it’s important that this platform includes bank and credit card integrations, accrual accounting support, and year-end reports. It should also be easy for your accountant or bookkeeper to access. Many startups go with QuickBooks, Xero, or NetSuite, all of which directly integrate with Mercury.

Spend management

You don’t want your spending (or your employees’ spending) to turn into a tax-time headache. Choose options, like Mercury cards, that are tightly connected to your banking. Your spend management tools should have strong spend limits, offer built-in receipt collection, and directly sync with your accounting tools.

Billing and invoicing

Tax reporting can get complicated if you don’t have clean revenue reporting. You’re going to need systems that enable you to handle your bills with precision and show clear invoice history and payment status. Mercury can handle this and integrate with your accounting system.

Receipt collection and audit trails

When it comes to deductions and audits at tax time, you’ll need backup documentation for every single transaction. You can use built-in tools inside solutions, like QuickBooks or Mercury, to automate receipt capture, or choose separate solutions that offer mobile receipt uploads and document storage.

Payroll

Payroll may be one of your largest expenses as a startup, and it’s a major part of your tax filings and deductions. Choose a tool that has features for calculating payroll taxes and contractor payments and that syncs with your accounting tools. Some options include Gusto and Rippling.

Financial planning and analysis (FP&A) or forecasting

Though you won’t need financial planning and analysis software for doing your taxes, you will need it for cash planning and timing expenses. Go with a tool that syncs with your accounting and payroll systems and offers scenario planning. Good options include Pry and Finmark.

Document collection

Pay attention to leases, loan agreements, contractor agreements, and incorporation docs. Though document collection isn’t  directly part of your finance stack, you’ll want to make sure your system can store these types of files for when your accountant needs them for audits or due diligence.

Pain at tax time can be caused by the thorny intricacies of tax law. But it’s also caused by ineffective systems that don’t support founders when they need it most. 

To avoid tax season stress, keep an eye out for these issues when evaluating your financial tools and systems: 

• Manual processes: With manual spreadsheet imports and non-exportable data, you may end up with inconsistent categorization, duplicate transactions, missed deductions, irregular income payments, and other tax issues.
• Poor integrations: Regardless of how many different tools you have, they must connect with one another for smooth data sharing. Otherwise, you could end up with missing payroll tax entries or a mismatch between your billing system and your books.
• Lack of real-time visibility into spend or balances: To make tax planning strategic, you should have insight into your numbers at all times, not just at the end of the month.
• No document trail: If you don’t have a way to capture receipts, you’re entering dangerous territory. A lack of documentation could increase the risk of an audit.

Tax time comes once a year, but Mercury supports founders as they handle taxes and finances year-round. Here are just some of the reasons startup founders, operators, and early finance hires choose Mercury to be a part of their financial stack: 

• Powerful account: Get business banking at your speed with virtual and physical cards, an intuitive mobile app, auto-transfer rules between accounts, and payment approvals in Slack.
• Transaction tagging and clean exports: Automatically and accurately categorize all transactions, so you can export clean and reliable data to your other tools.
• Sub-accounts to separate expenses: Keep your expenses organized by using sub-accounts. Submit expenses with data that’s auto-scanned from receipts, which saves you minutes on each transaction.
• Integration with accounting software: Mercury integrates with QuickBooks, Xero, and NetSuite, so closing the books each month is a breeze.

Whether you’re a DIY founder and you’ve been cobbling together your finance workflows on your own, a founder who lets the experts handle it all, or your approach falls somewhere in between, it's a good idea to evaluate where your current finance tech stack sits. That way you can pinpoint where you want to be when tax time comes around.

If thinking about tax season gives you heartburn, it’s likely your startup’s finance tech stack isn’t up to par. Consider whether you have the right components in place and whether they all integrate for automated data sharing. If your systems aren’t there yet, tap into the urgency of tax time and start making changes today. 

With the right finance stack — including founder-focused tools, like Mercury — you’ll be able to minimize financial chaos, streamline tax prep, and focus your energy on what the rest of the year holds: growth without financial friction. Explore how Mercury helps founders reduce tax stress today.