Atlanta earned the nickname Transaction Alley because a large share of U.S. card payments is processed by companies based in the metro area. That concentration of processors, acquirers, issuers and software vendors has produced a steady stream of fintech startups: payment facilitators, embedded payments platforms, B2B payables tools, lending software and the infrastructure companies that sit between them.
These companies share an accounting problem that most other startups never face. Large amounts of money move through the business without belonging to it. A payments company that processes $40 million a year may earn $600,000 of it, and the books, the tax return and the investor deck all depend on drawing that line correctly. This guide covers the questions that come up most often in fintech accounting in Atlanta, from the first processing contract through a priced round.
Gross or net: the revenue question that shapes everything else
Under the revenue recognition standard, ASC 606, a company reports revenue gross when it is the principal in a transaction and net when it is an agent. The test is whether you control the specified good or service before it is transferred to the customer. Indicators include whether you are primarily responsible for fulfilling the promise, whether you carry inventory risk, and whether you have discretion in setting the price.
For payments businesses this is not a technicality. Whether interchange, network fees and processor costs appear as revenue and cost of revenue, or are netted before revenue is reported at all, can change top-line revenue by a factor of ten while gross profit stays the same. Two companies with identical economics can present very differently.
The answer depends on the contracts, and it is not always the same for every revenue stream in a single company. A platform may be the principal for its software subscription and an agent for the payment volume that runs through it. Document the analysis once, in writing, for each revenue stream. When a lender, acquirer or institutional investor reviews your statements, that memo is one of the first things they ask for, and reconstructing it during diligence is expensive.
Customer funds, settlement timing and the balance sheet
The second problem is timing. Money arrives from card networks or banks on one schedule, is owed to merchants or users on another, and may sit in reserve accounts at a sponsor bank on a third. Useful books for a payments company show each of those balances clearly:
- Settlement receivables and payables. Amounts due from processors and networks, and amounts due to merchants or users, tracked separately rather than netted into a single clearing account.
- Funds held for customers. Whether these belong on your balance sheet depends on the legal arrangement, including who holds the account and in whose name. The accounting follows the contracts, so the contracts need to be read by someone who knows what to look for.
- Reserves and collateral. Rolling reserves and deposits held by a sponsor bank or processor are generally your assets, but they are not cash you can spend and should not be presented as if they were.
- Chargebacks and losses. Disputes, fraud losses and negative merchant balances need a reasonable estimate at each period end, not just an expense when a loss is finally written off.
Behind all of this sits a daily reconciliation between processor reports, bank activity and your own ledger. Companies that postpone building that three-way reconciliation almost always discover unexplained differences later, usually at the moment someone outside the company is looking.
Licensing brings its own financial reporting
Depending on how money flows through your product, you may need money transmitter licenses, or you may be structured to operate through a licensed partner instead. That is a legal question to settle with counsel early. The accounting consequence is the part founders tend to miss: licensed money transmitters are generally subject to minimum net worth requirements, surety bonds and ongoing financial reporting to state regulators, often including audited financial statements. In Georgia, money transmitters are licensed by the Department of Banking and Finance, which requires a surety bond and evidence of adequate net worth and generally reviews audited financial statements as part of licensing. Most other states run their own regime.
If licensing is on your roadmap, your books need to be on an accrual basis and audit-ready before the first application goes in, not after. Our audit and assurance team can explain what a first-year audit will require.
Software development costs after the 2025 tax law
For tax years beginning in 2022 through 2024, companies were required to capitalize research and experimental expenditures, including software development, and amortize domestic costs over five years and foreign costs over 15 years. Because deductions were deferred, the rule could cause loss-stage startups to report taxable income. The 2025 federal tax law changed it again.
Under new Section 174A, domestic research and experimental expenditures paid or incurred in tax years beginning after December 31, 2024 can be deducted currently. Software development costs continue to be treated as research and experimental expenditures. Foreign research and experimental expenditures are still amortized over 15 years.
The transition rules matter as much as the new rule:
- Eligible small businesses that met the gross receipts test for their first tax year beginning after 2024 could elect to apply the new treatment retroactively to tax years beginning in 2022 through 2024. That election was generally made on amended returns that had to be filed by July 6, 2026, so for most companies the window has now closed.
- Taxpayers can also elect to deduct remaining unamortized domestic research costs from 2022 through 2024 over one or two years, beginning with the first tax year beginning after December 31, 2024.
These are elections with deadlines, not automatic results. If your company capitalized development costs in 2022, 2023 or 2024 and its 2025 return has not been filed yet, the choice between a one-year and a two-year recovery deserves attention before that return is finalized.
The R&D credit and the payroll tax offset
Separately from the deduction, qualified research can generate the federal research credit under Section 41. For early-stage companies with no income tax to offset, the more useful feature is the payroll tax election. A qualified small business, generally one with gross receipts under $5 million for the year and no gross receipts before the five-year period ending with that year, can elect to apply up to $500,000 of research credit per year against the employer’s share of payroll taxes. The election is made on Form 6765 with a timely filed income tax return, and the credit is then applied against the employer’s Social Security tax and then Medicare tax on the company’s payroll tax returns using Form 8974.
Two cautions. First, the credit and the Section 174A deduction interact: the deduction is generally reduced by the amount of the credit unless the company elects a reduced credit instead, so the two should be modeled together. Second, the IRS expects documentation of the business component, the technical uncertainty and the process of experimentation. Time tracking for engineers is much easier to set up in advance than to reconstruct.
Georgia also offers a research tax credit for qualifying businesses in specified industries that conduct qualified research in the state and claim the federal research credit. Our tax credits team can review whether federal and Georgia credits both apply.
Sales tax on payments software
Georgia generally does not impose sales tax on software as a service that customers access remotely without receiving a copy of the software. That is not the rule everywhere. Several states tax SaaS or data processing services, and a platform that sells to merchants nationwide can create filing obligations in states where it has no employees. A multistate nexus review belongs in the plan before revenue in other states becomes material.
The finance function a payments startup grows into
The sequence we see most often at fintech startups is predictable. Founders begin with cash-basis bookkeeping, sign a sponsor bank or processor that asks for financial statements, raise a seed round, and then discover in the first serious diligence process that revenue, customer funds and reserves were never separated properly. The fix at that point is a restatement.
A better sequence is to move to accrual accounting at the first processing contract, document revenue policies at the same time, build the daily reconciliation before volume scales, and add controller-level review once the company is reporting to a bank partner or regulator. Many of our startup clients begin with monthly accounting and add outsourced CFO support as investor and partner reporting increases.
Working with our Atlanta team
Manay CPA’s Atlanta office works with technology and payments companies from pre-revenue through growth stage. We have served businesses from Georgia since 2001 and support clients in all 50 states, which matters for a payments company whose customers are rarely in one place.
Frequently asked questions
Should a payments startup report revenue gross or net?
It depends on whether the company is the principal or the agent for each promise in its contracts. The test under ASC 606 is control of the specified good or service before it transfers to the customer. Many payments companies are principals for some revenue streams and agents for others, so the analysis should be documented stream by stream.
Can a startup deduct software development costs in 2026?
Generally yes, for domestic costs. Section 174A allows domestic research and experimental expenditures, including software development, to be deducted in tax years beginning after December 31, 2024. Foreign research and experimental expenditures are amortized over 15 years, and elections are available to recover domestic costs capitalized in 2022 through 2024 over one or two years.
What is the R&D credit payroll tax offset?
A qualified small business can elect to apply up to $500,000 of its federal research credit each year against the employer’s share of payroll taxes. It is designed for young companies that have research spending but no income tax liability to use the credit against.
Is SaaS taxable in Georgia?
Georgia generally does not tax software as a service accessed remotely, but software delivered electronically or on physical media can be treated differently, and other states have their own rules. Companies selling across state lines should review where they have sales tax obligations.
Talk to us
If you are building a payments or fintech company in Atlanta and want books that will hold up to a sponsor bank, a regulator or an investor, we can review where you stand and what to fix first. Book a consultation with our Atlanta team.
