Stop Manual Labor in your Startup and Focus on your Core Activities

On startups, tax and not going to jail

Lyudmil Hubanov
Jul 21, 2017 · 3 min read

Are you just starting your business? Are you trying to figure out what to do in order to be tax compliant as hell? Then this article might be just for you. Let’s go through what’s invoicing and why is it so important.

First of all, all your clients and trading partners need to know that you’re reliable. So not issuing an invoice when they just transferred you the money isn’t cool. Now imagine you’ve just purchased a nice SaaS product and then you have to wait for 1 week to get a decent invoice?

You’d think that sounds like you’re in the mid 20th century, waiting for the mailman to deliver your invoice.

Well, some people use Microsoft Excel in order to create and send invoices by email. Some more apt people use their accounting software to manually send invoices.

That’s great for when you’ve got 20 customers/month, but let’s be honest, you aren’t in the startup business unless you’re making the world a better place, unless you’re revolutionizing the way X works, but most importantly — unless you’re scaling.

So there you have it, you’ve started, you’re selling a software product, which requires debugging, development and a sacrifice to the gods. How do you envision manually creating invoices for your ever growing subscription base? Let me help you out with this one — your churn rate is now going high, because you have less and less time for customer support.

Your next logical step is to Google “Has Elon Musk invented automated invoicing yet?”. You find a nice solution that works just fine for you, but…

Have you ever heard about VATMOSS?

Well that should make your day! What if I told you that if you’re selling an e-service, you have to apply the tax rate of your end customer’s country of residence? Yeah, I know, just call me Morpheus.

VATMOSS is the name the Europeans have for it. Now, you’ve got more and more countries implementing similar legislation, such as Singapore, Russia, New Zealand, South Africa, etc. So here’s how to deal with it:

1. You need to establish whether it’s a B2B or a B2C transaction.

2. You need to gather data on customer’s location (usually at checkout)

3. You need to charge her/him the right tax amount on payment

4. You need to adjust the tax rate on your invoice and send it to your customer.

Don’t you just love VATMOSS?

So which one is it going to be? The red pill or the blue pill?

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