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How a once-hot accounting fintech’s bet on AI led to bankruptcy

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Bench Accounting, like many fintech startups, had ambitions to shake up a boring but important corner of finance — in this case, bookkeeping for small businesses. 

It racked up more than 10,000 clients in a little over a decade and seemed well on its way. Yet that wasn’t fast enough to make it the hot fintech it aspired to be when it raised over $100 million in venture financing. In a final push to improve its business, Bench turned to tech’s favorite new go-to: AI. It laid off staff and introduced new automation programs, including a bot named BenchGPT. 

It all culminated in nothing short of a disaster, punctuated by a troubled 2023 tax season when the company needed to request extensions for many of its clients, according to former employees. The next year was no better. As 2024 ended, Bench told clients it couldn’t handle their books. This January, the company filed for bankruptcy, hammering investors including Contour Venture Partners, Bain Capital Ventures and Inovia Capital. Its customers were temporarily left in limbo until an acquirer agreed to buy its assets and revive the business. 

“It’s literally days before year-end and I don’t know what my books look like,” former Bench client Sam Plester, chief executive officer and founder of Mission Brands Consulting in Madison, Wisconsin, said during an interview in December, adding that he had to pay a different firm to redo his books. 

Bench’s downfall is a cautionary tale for companies in a hurry to use AI to transform their business. The episode capped a year of ugly headlines for once-promising fintechs that were VC standouts — and are now learning that there’s virtually no margin for error when dealing with financial services. As the bankruptcy works its way through a Vancouver court, KSV Restructuring Inc., the trustee retained to oversee the proceedings, expects almost all investors to be wiped out. Bench’s most senior creditor, National Bank of Canada, is expected to get only a fraction of what it lent back, according to court filings. 

One serial acquirer saw Bench’s closure as an opportunity. Jesse Tinsley, co-founder and CEO of Employer.com, reached out to the Bench team on the day of the closure announcement to place his bid for the company’s assets. He won the deal and promised to honor all customer contracts by rehiring bookkeepers and taking a back-to-basics approach. “If you just look at the simple nuts and bolts of it, you can run this business well, especially if you don’t have the financial pressure of VC or private equity funding,” said Gary Levin, co-founder and chief strategy officer of Employer.com. The deal, terms of which weren’t disclosed, is expected to close this quarter pending court approval. 

This account of Bench’s challenges is based on interviews with more than a dozen current and former executives, employees and investors in the company who asked not to be named discussing its internal affairs, as well as documents provided by them.

Internal challenges

By late 2021, former Bench executives say the company was garnering $35 million in revenue and growing 40% annually. Yet, it still wasn’t profitable; its automation efforts required investment, and the small business segment is marked by notoriously high turnover rates, meaning it lost clients from closures. Bench wasn’t demonstrating the traits of a venture success story. It wasn’t a hypergrowth, high-margin software business, the type of metrics that hold the potential for a public stock listing.

Despite this, Ian Crosby, co-founder and former CEO of Bench, was in talks that year to receive an acquisition offer valued between $200 million and $300 million from business banking startup Brex, technology publication Newcomer reported. He used the offer as an opportunity to pitch his board on a new path forward: He would conduct another fundraise and use the money to take a bigger bet — an expansion into banking services. The board agreed and in June 2021 Bench announced it had raised $60 million of blended equity and debt financing in a round led by Contour Venture Partners with participation from Altos Ventures, Inovia Capital, Shopify and Bank of Montreal. 

With fresh cash in the bank, Bench tripled the size of its engineering, product and design team to build the next iteration of the business. It began burning through that cash — spending about $1.5 million per month at its peak, according to a former executive. A few months after the 2021 funding round closed, board members approached Crosby with concerns, according to people familiar with the discussions. Instead of straying too far from the core bookkeeping business by expanding into banking services, board members thought Bench should use the new funding to focus on achieving profitability. The board insisted the goal should be slashing one of the company’s biggest expenses: bookkeepers, the same people said. 

In the months following the June funding round, Crosby and board members clashed over whether to continue gradually automating processes, bet big on automation or move ahead with the expansion into banking services, according to former executives. On Dec. 1, 2021, Crosby was removed as the company’s CEO, according to people close to the discussions. He declined offers to stay on the board or take a different executive position and exited the company, they said. 

In August 2022, Bench Chief Financial Officer Jean-Philippe Durrios was promoted to CEO. By this point, a significant portion of the $30 million in series C equity funding had been spent, according to people familiar with the company’s operations. Durrios did not respond to requests for comment. 

AI rollout

Durrios’ tenure was defined by an intense focus on profitability, according to former executives. In the first two years under his leadership, Bench’s 613-person staff underwent multiple rounds of layoffs. By the time it filed for bankruptcy, Bench had 413 employees.  

In mid-2023, Durrios implemented a strategy designed to increase the efficiency of the bookkeepers by splitting them into specialized teams and arming them with AI tools. Under the new model, associates took over client communications despite no longer performing the bulk of the bookkeeping services themselves. The number of clients they were responsible for swelled from the 70 or so they handled completely, to roughly 200 for which they only fielded questions, according to former employees. Shortly after the reorganization, about 40 bookkeepers were laid off, a former executive said, adding strain to the implementation. 

Bench hired outsourcing firm HJS Accountants and promised that upcoming AI product launches would make everything run smoothly. One of these new programs was called BenchGPT, an internal tool for employees to ask questions about client needs. The tool proved to be unreliable, according to a former employee. Bench launched a similar chatbot tool for clients designed to help with expense categorization, but it was often inaccurate and its entries needed to be manually fixed, two employees said. HJS Accountants did not respond to a request for comment. 

As with most AI product launches, the tools gradually improved, but weren’t live in time to support the pared-down bookkeeping team for the 2023 tax season, according to former employees. For that year, Bench was unable to meet filing deadlines and requested extensions for a significant portion of its clients, the same people said. The company needed to rehire bookkeepers, adding additional financial pressure. 

Meanwhile, people familiar with the company’s operations say Bench was frequently facing cash shortages and leaned on bridge rounds of venture funding and debt to continue operating. During Durrios’ tenure, Bench paid off its debt from Bank of Montreal and obtained an increased credit line from National Bank of Canada, the same people said. 

Last fall, Durrios told the board that the business needed money again. They responded with additional funding and sent Adam Schlesinger from Inovia Capital to evaluate the state of the business. In October, Schlesinger was appointed to replace Durrios as CEO while the board searched for a buyer for Bench. However, Bench had breached terms attached to its line of credit, according to people who were present and asked not to be named discussing confidential information. 

On Dec. 27, Bench posted to its website that it was closed for business and recommended clients turn to a competitor, Kick. In January, Bench Accounting Inc. and 10Sheet Services Inc., which operated as a consolidated business, filed for bankruptcy with an accumulated deficit of $135 million, according to a report by the trustee, KSV. National Bank of Canada did not respond to requests for comment. Bank of Montreal declined to comment. 

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Accounting firms seeing increased profits

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Accounting firms are reporting bigger profits and more clients, according to a new report.

The report, released Monday by Xero, found that nearly three-quarters (73%) of firms reported increased profits over the past year and 56% added new clients thanks to operational efficiency and expanded service offerings.

Some 85% of firms now offer client advisory services, a big spike from 41% in 2023, indicating a strategic shift toward delivering forward-looking financial guidance that clients increasingly expect.

AI adoption is also reshaping the profession, with 80% of firms confident it will positively affect their practice. Currently, the most common use cases for AI include: delivering faster and more responsive client services (33%), enhancing accuracy by reducing bookkeeping and accounting errors (33%), and streamlining workflows through the automation of routine tasks (32%).

“The widespread adoption of AI has been a turning point for the accounting profession, giving accountants an opportunity to scale their impact and take on a more strategic advisory role,” said Ben Richmond, managing director, North America, at Xero, in a statement. “The real value lies not just in working more efficiently, but working smarter, freeing up time to elevate the human element of the profession and in turn, strengthen client relationships.”

Some of the main challenges faced by firms include economic uncertainty (38%), mastering AI (36%) and rising client expectations for strategic advice (35%). 

While 85% of firms have embraced cloud platforms, a sizable number still lag behind, missing out on benefits such as easier data access from anywhere (40%) and enhanced security (36%).

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Private equity is investing in accounting: What does that mean for the future of the business?

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Private equity firms have bought five of the top 26 accounting firms in the past three years as they mount a concerted strategy to reshape the industry. 

The trend should not come as a surprise. It’s one we’ve seen play out in several industries from health care to insurance, where a combination of low-risk, recurring revenue, scalability and an aging population of owners create a target-rich environment. For small to midsized accounting firms, the trend is exacerbated by a technological revolution that’s truly transforming the way accounting work is done, and a growing talent crisis that is threatening tried-and-true business models.

How will this type of consolidation affect the accounting business, and what do firms and their clients need to be on the lookout for as the marketplace evolves?

Assessing the opportunity… and the risk

First and foremost, accounting firm owners need to be aware of just how desirable they are right now. While there has been some buzz in the industry about the growing presence of private equity firms, most of the activity to date has focused on larger, privately held firms. In fact, when we recently asked tax professionals about their exposure to private equity funding in our 2025 State of Tax Professionals Report, we found that just 5% of firms have actually inked a deal and only 11% said they are planning to look, or are currently looking, for a deal with a private equity firm. Another 8% said they are open to discussion. On the one hand, that’s almost a quarter of firms feeling open to private equity investments in some way. But the lion’s share of respondents —  87% — said they were not interested.

Recent private equity deal volume suggests that the holdouts might change their minds when they have a real offer on the table. According to S&P Global, private equity and venture capital-backed deal value in the accounting, auditing and taxation services sector reached more than $6.3 billion in 2024, the highest level since 2015, and the trend shows no signs of slowing. Firm owners would be wise to start watching this trend to see how it might affect their businesses — whether they are interested in selling or not.

Focus on tech and efficiencies of scale

The reason this trend is so important to everyone in the industry right now is that the private equity firms entering this space are not trying to become accountants. They are looking for profitable exits. And they will do that by seizing on a critical inflection point in the industry that’s making it possible to scale accounting firms more rapidly than ever before by leveraging technology to deliver a much wider range of services at a much lower cost. So, whether your firm is interested in partnering with private equity or dead set on going it alone, the hyperscaling that’s happening throughout the industry will affect you one way or another.

Private equity thrives in fragmented businesses where the ability to roll up companies with complementary skill sets and specialized services creates an outsized growth opportunity. Andrew Dodson, managing partner at Parthenon Capital, recently commented after his firm took a stake in the tax and advisory firm Cherry Bekaert, “We think that for firms to thrive, they need to make investments in people and technology, and, obviously, regulatory adherence, to really differentiate themselves in the market. And that’s going to require scale and capital to do it. That’s what gets us excited.”

Over time, this could reshape the industry’s market dynamics by creating the accounting firm equivalent of the Traveling Wilburys — supergroups capable of delivering a wide range of specialized services that smaller, more narrowly focused firms could never previously deliver. It could also put downward pressure on pricing as these larger, platform-style firms start finding economies of scale to deliver services more cost-effectively.

The technology factor

The great equalizer in all of this is technology. Consistently, when I speak to tax professionals actively working in the market today, their top priorities are increased efficiency, growth and talent. Firms recognize they need to streamline workflows and processes through more effective use of technology, and they are investing heavily in AI, automation and data analytics capabilities to do that. Private equity firms, of course, are also investing in tech as they assemble their tax and accounting dream teams, in many cases raising the bar for the industry.

The question is: Can independent firms leverage technology fast enough to keep up with their deep-pocketed competition?

Many firms believe they can, with some even going so far as to publicly declare their independence.  Regardless of the path small to midsized firms take to get there, technology-enabled growth is going to play a key role in the future of the industry. Market dynamics that have been unfolding for the last decade have been accelerated with the introduction of serious investors, and everyone in the industry — large and small — is going to need to up their games to stay competitive.

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Trump tax bill would help the richest, hurt the poorest, CBO says

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The House-passed version of President Donald Trump’s massive tax and spending bill would deliver a financial blow to the poorest Americans but be a boon for higher-income households, according to a new analysis from the Congressional Budget Office.

The bottom 10% of households would lose an average of about $1,600 in resources per year, amounting to a 3.9% cut in their income, according to the analysis released Thursday. Those decreases are largely attributable to cuts in the Medicaid health insurance program and food aid through the Supplemental Nutrition Assistance Program.

Households in the highest 10% of incomes would see an average $12,000 boost in resources, amounting to a 2.3% increase in their incomes. Those increases are mainly attributable to reductions in taxes owed, according to the report from the nonpartisan CBO.

Households in the middle of the income distribution would see an increase in resources of $500 to $1,000, or between 0.5% and 0.8% of their income. 

The projections are based on the version of the tax legislation that House Republicans passed last month, which includes much of Trump’s economic agenda. The bill would extend tax cuts passed under Trump in 2017 otherwise due to expire at the end of the year and create several new tax breaks. It also imposes new changes to the Medicaid and SNAP programs in an effort to cut spending.

Overall, the legislation would add $2.4 trillion to US deficits over the next 10 years, not accounting for dynamic effects, the CBO previously forecast.

The Senate is considering changes to the legislation including efforts by some Republican senators to scale back cuts to Medicaid.

The projected loss of safety-net resources for low-income families come against the backdrop of higher tariffs, which economists have warned would also disproportionately impact lower-income families. While recent inflation data has shown limited impact from the import duties so far, low-income families tend to spend a larger portion of their income on necessities, such as food, so price increases hit them harder.

The House-passed bill requires that able-bodied individuals without dependents document at least 80 hours of “community engagement” a month, including working a job or participating in an educational program to qualify for Medicaid. It also includes increased costs for health care for enrollees, among other provisions.

More older adults also would have to prove they are working to continue to receive SNAP benefits, also known as food stamps. The legislation helps pay for tax cuts by raising the age for which able bodied adults must work to receive benefits to 64, up from 54. Under the current law, some parents with dependent children under age 18 are exempt from work requirements, but the bill lowers the age for the exemption for dependent children to 7 years old. 

The legislation also shifts a portion of the cost for federal food aid onto state governments.

CBO previously estimated that the expanded work requirements on SNAP would reduce participation in the program by roughly 3.2 million people, and more could lose or face a reduction in benefits due to other changes to the program. A separate analysis from the organization found that 7.8 million people would lose health insurance because of the changes to Medicaid.

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