Vancouver-based cloud software firm Bench Accounting recently shut down, leaving thousands of North American small and medium-sized enterprises (SMEs) with concerns about access to their data. In a last-ditch effort to reassure customers, the company promised to maintain data access for 10 weeks, but ultimately, the situation was averted when the firm was acquired by Employer.com. However, the experience has highlighted the vulnerability of cloud-based accounting firms to collapse, even those with a large customer base.
- Many customers have raised concerns about the loss of access to their data, with one customer reporting that his information was “just gone” after paying to migrate it from QuickBooks.
- The crisis was averted when the firm was rescued in a buyout, but the incident has raised questions about the stability of cloud-based accounting firms.
The collapse of Bench Accounting has sparked debate about the differences in the accounting markets between the US and UK. According to Ryan Pearcy, founder of Digital Transformers UK and a leading cloud tech podcaster, the firm’s initial success in the US market reveals fundamental contrasts between the two regions. “The UK market has flourished into trusted advisers, filling a void left by banks,” he explains. “In the US, it’s far more transactional. Many accountant/client relationships already run via software platforms.”
The Role of Investment in Accounting Firm Collapse
The collapse of Bench Accounting can be attributed, in part, to the aggressive nature of the investment market. The firm managed to raise $113m in funding, which came with risks. “Investment backers typically demand high growth,” Pearcy says. “If the company’s not hitting agreed metrics, the backers have more of an incentive to scrap it than go for another funding round.” This highlights the potential risks of relying on external funding to sustain an accounting firm.
- Other experts believe that the UK accounting software market has lacked resilience for some time.
- The market’s lack of diversity and representation of user groups, particularly unrepresented taxpayers, poses a structural challenge.
Kevin Sefton FCA, Co-Chair of the Accountants in Practice Specialist Interest Group at UK industry body BASDA, highlights the lack of resilience in the market. “The user group with the greatest reliance on commercial platforms is unrepresented taxpayers,” he notes. “But new HMRC figures on self-assessments from that group show that just 3% were filed via third-party software.” This poses a major challenge for the market, as even with the government’s commitment to extend MTD for income tax, fewer than one million unrepresented taxpayers will be in scope.
“There’s currently no protection for customers’ data if a UK vendor goes under for financial reasons,” warns BASDA CEO Kevin Hart. “The buyer bears the risk.”
The collapse of Bench Accounting has also raised questions about the role of accountants in safeguarding clients’ data. According to ICAEW Head of Data Analytics and Tech Ian Pay, the firm’s team of backroom staff with basic bookkeeping training did not provide the type of safety net that traditional accountants can offer. “Bench users no doubt thought the platform was safe, right up until it wasn’t,” he says. “Its team of backroom staff with basic bookkeeping training didn’t provide the type of safety net that traditional accountants can offer.”
The Evolving Role of Accountants
The collapse of Bench Accounting highlights the critical role of accountants as safeguards between client businesses and software providers. “Many business owners don’t understand their own finances,” Pearcy agrees. “so accountants are still needed. But as artificial intelligence (AI) erodes compliance work, their role will evolve. Advisory skills will be in greater demand, and assurance will become more important for providing comfort in the AI tools that firms adopt.” This underscores the importance of accountants in providing guidance and support to clients.
In conclusion, the collapse of Bench Accounting highlights the importance of understanding the risks and challenges associated with cloud-based accounting firms. As the market continues to evolve, accountants will play a critical role in safeguarding clients’ data and providing guidance and support to businesses. By embracing software products and focusing on advisory skills, accountants can ensure a stable and secure future for their clients.