Bench Accounting Closes: Next Steps for Clients

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On Friday, Bench Accounting, the Canada-based online bookkeeping and tax platform, abruptly announced that it was closing, effective immediately. Suddenly, Bench’s clients were unable to access their data and information.

That’s a scary situation for businesses, especially as it is literally year-end and there are lots of tax deadlines coming at us fast. Things like W-2s, 1099s, and income tax filings are due very soon. Most business licenses are also due in the first quarter, and those are often based on revenue numbers.

So what’s a business to do now?

Bench Acquired by Employer.com

This is still a very fluid situation. And in breaking news, it was just announced that Bench was acquired by Employer.com. Employer.com has said that they intend to relaunch the service soon, but details are not available yet.

Important Upcoming Tax Deadlines

It’s important that you know what the upcoming tax deadlines are so that you can be prepared:

January 15, 2025: 4th Quarter, 2024, estimated taxes due
January 31, 2025: W-2s due
January 31, 2025: 1099-NECs due
January 31, 2025: 4th Quarter, 2024, payroll tax reports due
March 17, 2025: Partnerships and S-corp returns due
April 15, 2025: Individual income tax return due (or extension)

Download Your Data

The first thing you will want to do is to get your data from Bench. As of the time of publication, the platform has not announced how you will do that, but when they do, you’ll want to go in there and immediately grab as much as you can.

Start with an Excel or Comma Separated Value (CSV) file of all the transactions that you have in Bench, but definitely for all of 2024. It would definitely help if you also grabbed all of 2023, so that we can figure out any year-end adjustments or other transactions that need to be carried over into 2024. Best case: your entire history.

But it’s not just the transactions, you’ll also want to know how they classified them (ie what expense categories each transaction was classified to). If you have options when you go to download your data, select every single field that they allow you to include for each transaction. If it is extra information, you can discard or ignore it later. But it may be hard to recreate it later if you don’t include it now.

You’ll also want to download copies of all tax filings that Bench has made on your behalf, including all income tax returns, payroll tax reports, 1099s, property tax reports, and sales and use tax reports and so on and so forth.

Download a month-by-month profit and loss statement, as well as a balance sheet for every month in 2024 as well as year-end statements for each year you have in the Bench platform.

If you provided any supporting documentation, such as receipts for purchases, you want to make sure that you have a copy of that as well.

You May Need to Start from Scratch

I’m going to warn you now. While I’m telling you to get all your data, you may find that it is going to be easier to start a brand new QuickBooks file than it is going to be importing your data from whatever files you are able to get from Bench.

The proprietary system that Bench used probably won’t play well with other accounting platforms. And while you can spend a lot of time mapping out fields, it may be easier and cleaner for you to link your new QB file to your bank and credit card companies, download the transactions, and classify everything anew.

I want to warn you because you probably want a new bookkeeping service to do this for you. And unfortunately, you’ll need to pay for it. Yes, you’ve already paid Bench but their work likely won’t move to a new platform in a clean and easy way.

I’m just going to say it – it sucks. I can only commiserate with you right now. And remind you that the fees you pay are going to be deductible business expenses.

Find a New Bookkeeper

Bench has made a referral to a new service that is very similar to Bench, using AI and technology to automate bookkeeping. I’m not familiar with them, so I cannot make a recommendation on whether they are a good service or not. Time will tell.

If you decide that you don’t want to go with the company that Bench is referring you to, then you’ll want to find a new bookkeeper and tax pro ASAP.

Most of the excellent tax pros will not take on new clients during “tax season” — basically January through April 15 or April 30. Or they will automatically put you on extension so that they can properly onboard you after tax season. Some tax pros may be willing to onboard new clients, but you’ll need to be early on in this process AND you will need to have your data together, clean, and ready for them to work with.

Be OK with an Income Tax Extension

An extension for your income tax returns is likely going to be needed for you this year, even if you normally don’t file an extension. Get comfortable with that, if you can.

Now, the extension is only for the completion of the return. It doesn’t give you any relief from the requirement that you pay your income taxes on time.

Use those reports, especially the P&L, that you will hopefully be able to download to try to estimate what your tax liability is going to be. Or use the IRS safe harbor rule to reduce the penalties for underpaying your taxes.

Things to Look For Going Forward

Since you have to find a new provider, let’s take a look as some of the things that will benefit you. So that maybe you’ll be happier with your new choice and not have to make a second change very quickly.

No Proprietary Accounting Software

One of the issues that always concerned me about Bench was their use of proprietary accounting software that made it difficult to move away from their service.

I highly recommend that any platform, service, or provider that you use going forward gives you the ability to own the account and also to make it easy to transition to a new service.

Many bookkeepers use QuickBooks for this purpose. It’s a large software platform, owned by Intuit, that has been around for a very long time. Your bookkeeper or tax pro may setup an account for you, but they should immediately change ownership to you. By using a SaaS solution like QuickBooks, Xero, or Freshbooks, you can change bookkeepers if you need to (or they suddenly go out of business).

Access to Your Bookkeeper and Tax Pro

While I am all for automating as much of our business life as we can and using technology in all its forms to do so, there is still very much a human element to finance and legal.

That’s why it’s been difficult for my clients that used Bench to have good financials. Good or great financials are the literal cornerstone to the work I do as a Fractional CFO. When we have questions about how items are classified, we need someone to talk to. That was difficult with Bench. And when we did get someone to talk to, it was often different than the person we talked to last time.

I’m a big believer in relationships. As we get to know each other, and how we run our businesses, I can give you better advice and guidance. Same with bookkeepers – they need to know the nuances to your business that comes with working on the same account month after month, year after year. Tax pros need to know what you did last year so that they can make the right decisions this year (hello carry-forward losses, depreciation schedules, etc).

As you select your new provider, I would encourage you to place a premium on a provider where you have personalized service and can reach a real person. I know that will be more expensive, but let me tell you, it will be a great investment for you.

Knowledge of Your Industry

Along with personalized service, I’d also recommend that you look for a bookkeeper and tax pros that are knowledgeable in your specific industry.

One of the issues that I saw with law firms is that Bench would double count revenue — once as funds went into the trust account (not revenue) and then again when the funds went into the operating account. Yikes! They also were not great about recognizing the liability of the trust account on the balance sheet and tying them out each month. Double yikes (because that could conceal a problem with the trust account and THAT could mean our bar licenses).

But it’s not just lawyers that need tax pros that specialize in their industry. Online content creators likely want someone that understands things like Stripe integrations and why you don’t want to connect the Stripe account to QuickBooks directly. Real estate investors want someone that is an expert on REPS and cost segregation studies. Doctors and dentists want bookkeepers that are familiar with the way insurance reimburses you and the cash flows through your business.

Literally, every single industry has its own quirks and nuances, and you’ll be better served by someone that has specific knowledge and experience with your industry.

A Sustainable Business Model

Look, I know that the Bench Accounting price was really attractive. But let’s stop and think about it – when someone is offering a service at a fraction of the cost of every other provider, are they building a sustainable business? What makes them different than the other providers that they can offer it so cheaply?

Bench told the world that they were using automation and technology to do a lot of the heavy lifting. But they had 600 or so employees. At an average of $100,000 an employee, they are looking at over $60 million in payroll costs alone, not to mention all the other overhead. At an average of $249 a month per client, that’s $32.9 million in revenue. Even at the $399 a month premium package, that’s only $52.7 million in revenue. That’s a really fast burn rate, even with a $60 million investment.

I’m not going to shame any business owner that is price conscious. But I’d like for more owners to become value-conscious. What are you getting for that monthly fee? Is this something that the company can continue to provide at this price point? Can you absorb costs if they increase fees to become profitable? Are you prepared to find a new provider if this one suddenly shuts down?

Sometimes, we need to pay extra. In the long-run, we will receive better service and have a smaller risk of a vital partner shutting down without warning.

A Written Information Security Plan

With all the technology and services that we use on a daily basis to run our companies, data security is extremely important. When you are working with bookkeepers and tax pros, as well as Fractional CFOs, you should ask them about their Written Information Security Plan.

Their WISP is how they protect your data! You want to know that they have this required document and that they are working to increase their security everyday.

If they don’t have a WISP, run, don’t walk, away from any financial services provider! It’s a major red flag!

Need a Referral?

While I may be a Fractional CFO, I focus on the strategic aspect of your business’s finances and growth. And no one wants to pay my rate to be your bookkeeper or to work on your taxes (I know my strengths and what I like to do best). But as a result, I have worked with a lot of different bookkeepers and tax pros.

Let me know if I can help you by making a referral to a new bookkeeper or tax pro. I know a lot of them and can recommend one that fits your needs and budget.

Best Practice Reminders With All Accounting Providers

Whether it is because you just got burned by Bench closing down or because you want to prevent the worst from happening to you, I want to remind you of some best practices:

One of the biggest tips I can give anyone when they are working with a bookkeeper, tax pro, or Fractional CFO: it’s still your business. You cannot completely step out of the finances. Abdication is not a good trait for an entrepreneur. You need to stay aware and on-top of every thing financial within your business.

Also, let’s talk document retention. Let’s make sure that you have what you need, outside of these service providers.

Download all reports to your own system. Preferably in Excel or CSV so that you can use them in a variety of other platforms. PDF is fine too. But stay away from too many of the proprietary systems.
Download all tax filings and communications to your permanent files.
Own your accounting software account.
Download your bank and credit card statements (remember when SVB had a sudden bank run and closed?)

Bench Accounting, In Conclusion

I’m not going to shame any business owner that chose Bench for their accounting. Especially for small businesses, they offered an attractive price and sold you on the technology and automation. It’s unfortunate for every client of theirs, as well as their employees, that they were not able to be successful and make it.

I hope that every single business owner is able to get their data and move on to a new provider that can provide an even better level of service. It sucks that here we are at year-end, with so much to do. This couldn’t have come at a worse time for most businesses.

As we move forward, it would be wise for all of us to critically think about our business partners and whether they have built a sustainable business model.

Please do not hesitate to reach out to Springboard Legal if we can be of any assistance during this process.

PS Check with your bank to make sure you are not getting charged with any new charges for Bench Accounting if you are moving services.