TaxCloud’s software integrates with e-commerce companies’ online shopping carts to calculate the sales tax based on their customers’ locations. The company also helps its US customers to file their tax returns in states where they have a sales tax obligation, and to pay their tax bills.
“If you’re an e-commerce business and you’re shipping across the country, it would be cost prohibitive to try to calculate the sales tax on your own,” said Max Lund, Director of Engineering, TaxCloud.
That’s because the tax rate varies depending on the customer’s location and there are more than 13,000 US jurisdictions to consider.
Instead, TaxCloud collects an average of $5 million of tax due from its customers – about 500 mostly small and medium-sized businesses – and pays this to the tax authorities on their behalf, through the Streamlined Sales Tax (SST) organization, which represents 24 states, including associate member Tennessee.
Homegrown ACH software failed to scale
TaxCloud pays SST in a single lump sum, and so needs to get funds from its clients in advance. To do that, it uses ACH payments, which do not incur the charges credit card payments would.
“Historically, we had a homegrown ACH system,” said Lund. “We had to log into our account at our partner bank and upload an XML file that listed all the ACH pulls we wanted to do. We had a long list of internal processes to make sure we were actually getting the money from those bank accounts.
It got to the point where we had so many payments submitted that we were freezing the bank’s website. It didn’t scale well.
At the same time, TaxCloud was under time pressure for each payment. “Most of our work to collect and remit funds happens within a two-week period,” said David Haberkorn, VP of Finance, TaxCloud. “Often, we only have hours between when we receive funds and when we start sending funds out to states.”
Enter automation – and serious time and money savings
In addition to its bespoke ACH system, TaxCloud used a homegrown billing system, which needed replacing. TaxCloud chose Chargebee as its new billing provider. And because GoCardless is a partner of Chargebee, TaxCloud also integrated GoCardless to automatically collect ACH payments from customers, for both SST and subscription payments.
Drawing funds automatically with GoCardless means we don’t even need to have an accounts receivable team – that’s very powerful. And for every customer that pays by GoCardless we save hundreds of dollars by avoiding credit card fees.
“I would much rather take money from a bank account. It's cheaper and less problematic,” added Haberkorn. “Once you have that money, they can't take it back. It's very easy for customers to do credit card chargebacks now. Usually, someone does that who's not the purchaser. Managing chargebacks takes time. There are fees associated with it, even if it's an error on the customer’s part.”
Because credit cards expire and sometimes get canceled, failure rates also tend to be higher than on direct bank payments.
Haberkorn estimates that the time taken for billing reconciliation and accounts receivable without GoCardless would be equivalent to half a full-time person. Now, that work is completed in just a few hours per week, a time saving of 65%.
Easy integration
“The GoCardless implementation experience was very pleasant,” said Lund.
I loved working with them. Each meeting we had was focused on our specific problems. The migration itself was easier than I expected.
"The documentation is good, and the APIs are great," added Lund. "I'm happy GoCardless has software development kits to support the languages that I prefer. So overall, I was impressed."
The integration between GoCardless and Chargebee very quickly solved some major and persistent pain points for TaxCloud.
“One of the biggest pain points with our old solution was that if anybody wanted to know anything, they had to go through a developer,” said Lund. “With GoCardless, anyone can see what they need to know.”
Improving trust and scalability
“The most important value we got out of GoCardless was that we now have a system we can trust,” said Lund. “It's got an audit trail, which we didn't have before. It's got a user interface that anybody can use to view payment statuses and schedules, which we also couldn’t do before. We can rely on the system, and it has all the tools we need to dig into any problems that pop up.”
Haberkorn added: “I’d say the biggest perk of GoCardless is scalability. We trust that the structure we have in place now will scale with us as we grow. If we grow by 20%, the amount of work required to collect payments and do our reconciliations won’t grow by 20%.”
