Automating taxes in Mexico - part I
Part I: Failing to understand what customers value in accounting
When people talk about automating accounting, I often hear comments like:
- “It’s ridiculous how many PDFs there are. You could just extract the info and automate the process.”
- “It’s so frustrating to keep sending documents. It should just forward automatically from my email.”
- “ChatGPT can definitely automate your accounting—look, someone did it with XYZ.”
While these frustrations are valid, they overlook a crucial point: automating accounting varies significantly by country, largely due to differences in tax systems.
Take Estonia, for example—where electronic invoices are minimal, and the tax system is relatively simple. Contrast that with Mexico, where we have a highly developed e-invoicing system but incredibly complex tax rules. The complexity in Mexico makes automation far more challenging than it might initially seem.
My naivety and initial missteps
I, too, was naive. I thought automating accounting would be fairly straightforward. Spoiler alert: the title of this blog is a lie. I didn’t automate accounting in Mexico—at least, not in the way you might think. Automation isn’t a one-time process that you complete and walk away from. It’s a continuous cycle of hustle, execution, and iteration.
Initially, I focused on the wrong things:
- Calculations, not PDFs: I realized that to automate an accountant's work, the focus shouldn't be on handling PDFs, but rather on automating calculations. Since Mexican invoices often come in XML format, extracting structured data seemed like a promising start.
- Learning tax calculations: Extracting invoice data was just the beginning. We then dove into the tax calculations, spending hours in conversations with accountants to understand how the tax system works and where exceptions apply.
However, we were only automating a small part of the process—the same part that any basic accounting software already handles. We were just scratching the surface, adding no real value to our customers but gaining a lot of insight ourselves. After two months, we realized we were going in circles.
Pivoting the approach
Accounting isn’t just a series of isolated tasks; it’s an entire cycle with specific deadlines. This cycle, filled with multiple activities, is what overwhelms most accountants and terrifies customers. Meeting every deadline on time is the real challenge.
In Estonia, for example, your personal annual tax declaration considers all income and expenses for the year, and it’s due in April. If you run a company, you must declare taxes monthly. But in Mexico, the complexity and frequency of these tasks multiply.
To truly "automate accounting," you must consider every step of this cycle, not just isolated parts. More importantly, you must focus on adding value for your customers. After all, it’s not your company or a bot that’s going to use this product—it’s your customer who needs to navigate these complexities.
Initially, I failed to grasp that. I didn’t understand that our goal wasn’t just to create another piece of accounting software. We were aiming to substitute the work of an accountant, democratizing their knowledge so that business owners could access reliable, technology-driven accounting services.
The shift in focus
We needed to clarify why we wanted to automate certain processes and determine which areas would benefit the most from automation. It wasn’t just about completing tasks but about understanding which specific parts of our operations would gain the most from being automated. So, we approached it methodically:
- Market study: We studied the market to understand what business owners need to report and the current pricing for monthly accounting services across different segments. This gave us a clear picture of where we could offer the most value.
- Accounting cycle breakdown: We broke down the accounting requirements for each segment, focusing on the "accounting cycle" and identifying the most time-consuming and error-prone tasks.
- Strategic execution: We chose a segment, defined the value we could offer, selected our tech stack, and executed our plan. This structured approach ensured that we weren’t just automating for automation’s sake but were strategically enhancing our services to meet specific customer needs.
Why automation made sense
Guatson has never had issues with scalability or adapting costs to market conditions, but our go-to-market strategy needed refinement. We needed to ensure that our value proposition resonated with our customers.
Growing slowly and steadily highlighted a critical gap: we didn’t fully understand our cost per customer or the exact resources needed for sustainable monthly growth. More importantly, we realized we could deliver far more value to our customers—not just through competitive pricing but by enhancing the quality, speed, and customization of our services.
This realization led us to focus on automation as the key to addressing these challenges while significantly improving the customer experience.
With automation, we’ve enabled near real-time accounting, replacing the traditional weeks-long wait for balance sheets and tax declarations. This immediacy empowers our customers to make informed decisions quickly, using the most up-to-date financial data available.
Moreover, automation allows us to offer tailored services. Instead of a one-size-fits-all approach, customers can choose from a range of add-ons, ensuring they only pay for what they need—whether it’s basic accounting or more specialized services like detailed tax planning or financial analysis.
Another significant benefit of automation is the transparency and control it provides. Customers can now manage their accounting processes directly, running tax declarations whenever they need to, with full visibility into what’s happening. This control builds trust and allows customers to manage their taxes more proactively, which is crucial for their business.
So, we went for it. Curious about what happened next? Check out Part II.