The Abrupt End of Bench Accounting

In a shocking development that has left small businesses scrambling, Vancouver-based online bookkeeping service Bench.co announced its immediate closure on December 27, 2024. The sudden shutdown of this once-promising fintech company, which had raised over $100 million in venture capital funding, has left hundreds of employees jobless and thousands of small businesses in limbo during a critical financial period.

The Announcement and Immediate Impact

On December 27, 2024, at 10:39 AM, Bench.co customers received an unexpected email announcing the immediate cessation of operations. The platform was taken offline simultaneously with the announcement, leaving customers without access to their financial data.

While the company has promised that customers will be able to access their records from December 30, 2024, until March 7, 2025, the timing – just days before the end of the fiscal year – has created significant challenges for businesses relying on Bench for their bookkeeping needs.

A Pattern of Warning Signs

Looking back, there were many indicators of potential trouble at Bench:

Recent Red Flags

• In July 2024, the company had already reduced its workforce by 4-5%

• Recent customer reports indicated declining service quality, with some noting significant delays in bookkeeping updates

• The company had been pushing customers to switch to annual contracts in recent weeks

• Former employees have revealed that Bench struggled to achieve profitability despite charging premium rates for its services

Structural Business Model Challenges

In 2017, I wrote a detailed analysis of Bench Bookkeeping's service model, exploring whether it was the right choice for small businesses. Today, with Bench's sudden closure on December 27, 2024, those insights have taken on new significance, offering valuable lessons about selecting critical business service providers.

The company's fundamental service model showed inherent limitations that may have contributed to its ultimate closure:

Limited Service Scope

• Offered only cash-basis accounting, missing crucial accrual-basis capabilities needed by growing businesses

• No accounts payable or receivable tracking, limiting visibility into business cash flow

• Inability to handle prepaid expenses, unearned revenue, and inventory management

Technology Constraints

• Reliance on proprietary software that locked customers into their ecosystem

• No direct export capability to major accounting platforms like QuickBooks or Xero

• Limited ability to migrate historical data, creating high switching costs for customers

Revenue Model Issues

• Base pricing of $299 monthly for basic services left little room for profitable scaling

• Additional accounting needs required external solutions, fragmenting the customer experience

• Attempt to balance human bookkeeping services with tech company margins created unsustainable operational costs

Missing Essential Services

• No integrated payroll services (at the time, this may have changed in recent years)

• Lack of 1099 preparation capabilities

• Unable to provide profit center segregation or job costing

• Limited ability to track billable expenses

These structural issues suggest that while Bench attempted to position itself as both a technology company and a service provider, it struggled to achieve the efficiency and scalability needed to make this hybrid model sustainable. The company's recent push for annual contracts and workforce reductions now appear to have been last-ditch efforts to address these fundamental challenges.

The Impact on Stakeholders

Customers

The shutdown has created multiple challenges for Bench's client base:

• Businesses that recently paid for annual services are facing uncertainty about refunds

• Many companies are left without completed books for 2024

• Customers must quickly find alternative bookkeeping solutions during the holiday period

• There are concerns about accessing and transferring financial records

• Some clients who recently signed up through financing agreements with Capchase are facing particular difficulties

  • One Hacker News user stated, 'I was just sold Bench.co for my three businesses and the sales person Luc Lewarne made me sign a payment agreement with Capchase. The agreement states that I still owe Capchase the full amount for a year, even if Bench.co shuts down..." 

Employees

The closure has had a devastating impact on Bench's workforce:

• Approximately 600 employees, primarily based in Vancouver, have lost their jobs

• The timing of the announcement, immediately after Christmas, has added to the personal impact

• Many employees reportedly had little to no advance warning of the closure

The Rise and Fall of Bench

Founded in 2012, Bench had positioned itself as a pioneer in combining human expertise with technological automation for bookkeeping services. The company had secured over $100 million dollars in funding, including:

• A $73 million Series C round in 2021

• Previous investments from notable firms including Bain Capital, Inovia Capital, and Shopify

Despite this strong financial backing, former employees suggest that Bench struggled to balance its dual identity as both a technology company and a service provider. The company's attempt to maintain both human-powered bookkeeping services and technological automation may have created unsustainable operational costs.

Next Steps for Affected Parties

Bench has provided some guidance for affected customers:

1. Data access will be available through March 7, 2025

2. The company is recommending Kick.co as an alternative service provider

3. Customers are advised to file tax extensions to provide additional time for transition

However, several crucial questions remain unanswered:

• Will customers receive refunds for prepaid services?

• How will the company handle incomplete 2024 bookkeeping?

• What support will be available for customers during the transition period?

Lessons and Industry Implications

The sudden closure of Bench raises important considerations for both businesses and the broader fintech industry:

• The importance of having contingency plans for critical business services

• The challenges of scaling service-based businesses in the tech sector

• The potential risks of relying solely on venture-backed companies for essential business functions

• The need for greater transparency in company operations and financial health

History Repeating: The ScaleFactor Parallel

The sudden closure of Bench bears striking similarities to another fintech accounting failure: ScaleFactor's shutdown in 2020. Both cases reveal common patterns in the challenges faced by venture-backed accounting technology companies:

Shared Characteristics

• Substantial Venture Funding: Both companies raised over $100 million ($103M for ScaleFactor, $100M+ for Bench)

• Technology-First Approach: Both attempted to automate accounting processes while maintaining human services

• Rapid Scaling Attempts: Both companies prioritized growth over sustainable operations

• Abrupt Closures: Both shutdowns came with minimal warning to clients and employees

Key Lessons Learned

The parallel failures of these companies highlight crucial insights about the accounting services industry:

1. The Human Element Remains Critical: As ScaleFactor's CEO admitted in 2020, "Customers want a combination of software and human support." Bench's closure reinforces this lesson.

2. Venture Scaling vs. Service Quality: The pressure to scale rapidly while maintaining service quality creates fundamental tensions in the business model.

3. Financial Stability Matters: The irony of accounting firms facing financial difficulties underscores the importance of sustainable business practices over rapid growth.

Looking Forward

While Bench has recommended Kick.co as an alternative service provider, affected businesses should carefully evaluate their options. The key is finding a provider who values stability and service quality over rapid growth. At Accounting Prose, we understand the urgency of finding a reliable, long-term accounting partner.

Our approach emphasizes:

Stability Through Sustainability

• Bootstrapped growth focused on long-term stability rather than rapid scaling

• No pressure from venture capital firms to prioritize growth over service quality

• Proven track record of weathering economic challenges while maintaining service levels

The Human-First Approach

• Direct access to experienced accountants who know your business

• Focus on building lasting relationships rather than maximizing customer acquisition

• Ability to provide customized solutions for your specific industry needs

Technology Balance

• Thoughtful adoption of technology to enhance (not replace) human expertise

• Integration with industry-standard platforms for easy data portability

• Commitment to continuous improvement without sacrificing service quality

We specialize in serving tech-focused companies including Software as a Service (SaaS), Hardware as a Service (HaaS), Software Development Agencies, and other type of tech startups. While we may not be the right fit for everyone, we're happy to provide referrals to trusted colleagues who serve other industries.

Conclusion

The closure of Bench serves as a stark reminder that when choosing business service providers, we must look beyond features and pricing to consider long-term sustainability and business continuity. While venture-backed companies may offer innovative solutions, the stability and personal touch of established independent firms often provide better long-term value for small businesses.

For those affected by the Bench closure, this is an opportunity to reassess your needs and choose a partner who can provide not just services, but long-term stability and growth support. Whether you choose to work with Accounting Prose or another provider, look for a partner who offers the right balance of human expertise, technological capability, and business sustainability.