Why Automated Bookkeeping Services Keep Shutting Down
ScaleFactor. Bench. And now Botkeeper.
Three companies. Over $300 million in venture capital combined. Armies of engineers, designers, and data scientists. And the same ending: an apologetic letter to customers, a rush to wind down operations, and thousands of small business owners left scrambling to figure out what happens to their books.
If you are a business owner who relies on outsourced accounting or outsourced bookkeeping services, you may be watching this pattern with growing unease and rightfully so. But there is a deeper story here than "tech startups fail." It is a story about what accounting actually is, and why the Silicon Valley approach to it keeps running into the same wall.
We think it is time to say that part out loud.
The Promise Was Seductive
To be fair to these companies, their pitch was compelling. What if you could automate bookkeeping? Strip out the labor, feed transactions through machine learning, deliver clean financials for a fraction of the cost of hiring a human? It sounded like what happened to travel agents, stockbrokers, and taxi dispatchers. Disruption was coming, and the only question was who would lead it.
ScaleFactor, based out of Austin, Texas, was one of the boldest bets in this space. Founded in 2014 and backed by marquee investors including Bessemer Venture Partners and Coatue Management, they raised over $100 million on the promise of AI that could fully automate small business accounting. The pitch was polished. The vision was exciting. The reality was something else entirely.
Behind their slick dashboard and AI branding, it turned out the books were largely being done by hand, by human accountants in Austin and an outsourced office in the Philippines. Customers received error-ridden financials. One business owner lost $17,000 due to a mistake that went undetected for months. When she complained, she was offered a partial refund contingent on signing a nondisclosure agreement. When COVID hit, ScaleFactor blamed the pandemic for shutting down. Former employees and customers told a different story.
Then came Bench. In December 2024, Bench shut down abruptly, locking over 12,000 active small business customers out of their own financial records right before tax season. What happened next is its own kind of cautionary tale. Three days later, a company called Employer.com announced it had acquired Bench, then removed the announcement, then put it back up. The CEO of Employer.com later admitted he had never spoken to anyone at Bench until the Saturday after the shutdown was announced. It was less of a rescue and more of a last-minute scramble dressed up as a strategic acquisition. For the business owners caught in the middle, the distinction did not matter much. The damage to their trust was already done.
Botkeeper is the most recent chapter. After eleven years and nearly $90 million raised, their founder described a platform on the verge of breakthrough, two months away from the next big launch. The market, however, ran out of patience before the vision could be proven. And yet:
“We built a world-class solution, but the market moved faster than our capital could keep up.”
Three different companies. Three different approaches. The same ending. What is really happening here?
The Cash Basis Trap and the Scale Problem
Here is something the VC pitch decks did not fully account for: the easiest version of bookkeeping to automate is cash basis accounting for simple businesses. Record what came in, record what went out, reconcile the bank feed. A well-built algorithm can handle a lot of that, and the investors were right about that part.
This model works reasonably well for businesses at or under $1 million in revenue. The transactions are simpler, the reporting needs are minimal, and the margin for error is more forgiving. It is a real market, and technology can serve it efficiently.
The problem is that simple cash basis bookkeeping for simple businesses is the low end of the market. The margins are thin. The clients price-shop. And there is a ceiling on how much value you can deliver before the client outgrows you.
So the natural next move is to go upmarket. Start serving more complex businesses. Offer accrual accounting, job costing, multi-entity consolidations, industry-specific reporting. Move into fractional CFO services. Offer strategic financial guidance alongside the compliance work.
That is when everything falls apart.
Because the moment you go upmarket, the work becomes custom, personal, and relational. You are not reconciling transactions anymore. You are understanding a business owner's goals, their industry quirks, their cash flow anxieties at 11pm on a Sunday. You are building the financial models that help them decide whether to hire, whether to expand, whether to take on debt. You are asking the kinds of questions a curious, capable person asks, not a trained algorithm.
That is not a technology problem. That is a people problem. And it is extraordinarily hard to scale.
The Human Element Problem That Nobody Wants to Admit
There is a reason the best accounting and bookkeeping relationships tend to look less like software subscriptions and more like trusted advisors. Business owners do not just want their numbers done. They want to understand their numbers. They want someone who asks why the cost of goods sold jumped 12% last quarter, who notices the pattern before the problem becomes a crisis, and who can sit across the table and say "here is what I see" with the confidence of someone who actually knows your business.
Accounting and bookkeeping are, at their core, deeply human services. The deliverable may look like a spreadsheet, but the value is the understanding underneath it: the judgment calls, the contextual awareness, the relationship that has been built over months and years.
“Technology makes great accountants faster. It does not replace the need for great accountants.”
This is the insight that the VC-funded disruptors kept missing, or at least kept hoping they could engineer around. They treated accounting like a data pipeline problem. But your books are not just data. They are a story about your business, and the people telling that story need to actually know you.
Even Indinero, which set out to be an accounting software company, eventually pivoted to become more of an outsourced accounting firm, essentially buying market share in a service business rather than disrupting it. Intuit tried to compete with their own ProAdvisor network by launching their own bookkeeping service. In all my conversations with business owners, I have never heard anyone speak highly of it, only frustration.
The market keeps delivering the same verdict: service businesses require service, delivered by people who give a damn.
Will Someone Ever Get This Right?
It is a fair question. The tech is getting better every year. AI tools are genuinely capable of doing more than they could even two years ago. Is it only a matter of time before some well-funded company cracks the code and dominates the bookkeeping and outsourced accounting market the way Salesforce dominated CRM?
Honestly? We do not think so, at least not in the way the venture capitalists envision it.
Here is why: accounting is not a commodity. It looks like one from the outside, especially at the low end of the market. But the moment a business owner needs something beyond basic transaction recording, they need expertise, judgment, and trust. Those things do not scale like software does. They accumulate slowly, through relationships and repetition and demonstrated reliability over time.
People want to work with other people who build them up and help them accomplish great things. They do not want to sit at a computer talking to bots.
The companies that succeed in this space long-term will not be the ones that eliminate the human element. They will be the ones that use technology to amplify what great human accountants can do. Technology that handles the repetitive work so that your accounting team can spend more time on what actually matters: understanding your business and helping you grow it.
That is a fundamentally different business model than "hire engineers, raise money, automate everything, and hope the economics work out." And it is a much harder story to tell to venture capital investors who want a 10x return in five years.
What This Means for Business Owners
If you have been with one of these platforms, or if you are evaluating outsourced accounting services right now, the lesson here is not that outsourcing your accounting is a bad idea. Outsourcing your accounting to a dedicated team of experts is a very good idea. The question is who you are trusting to do it.
A few things worth thinking about as you evaluate your options:
Is there a real team behind your account? Not just software, not just an offshore back-office with no context about your business, but an actual team of professionals who know your industry, your goals, and your numbers. As your business grows, that team should be able to grow with you, from bookkeeping into controller-level work and fractional CFO services when the time is right.
Are they thinking beyond the transaction layer? Good bookkeeping services do not just record what happened. They help you understand it and plan around it. That is the idea behind Tactical Accounting: turning your numbers into decisions that actually move your business forward. If your accounting provider cannot speak to your P&L in context, that is a warning sign.
What happens if they go away? The Bench and Botkeeper situations were wake-up calls for a lot of business owners. Make sure your provider is stable, transparent, and has a real business model, not just a runway of investor capital.
Are they curious about your business? The best accounting relationships feel collaborative. Your accountant should be asking questions, not just processing paperwork. Curiosity is one of the most underrated qualities in a financial partner.
The Basis 365 Approach: Capable, Caring, and Curious
At Basis 365 Accounting, we have built our entire model around the belief that Helping People Build Strong Businesses® is not something you can automate. Our fractional team approach, built around real professionals who know your business, is specifically designed to give you the expertise of a full finance department without the cost of building one in-house.
We use technology, absolutely. We use it to be faster, more accurate, and more responsive than a traditional accounting firm. But we have never confused the tool with the work. The work is understanding where your business is, where it is going, and what needs to happen financially to get it there.
That is what our P-R-O-F-I-T approach is built around. Every letter in that framework exists for a reason, but consider the "R" for Relationships. It is not there as a feel-good addition. It is there because after years of working with growing businesses, we know that the relationship between a business owner and their accounting team is what determines whether the numbers actually get used. A real relationship means we understand your goals before we look at your chart of accounts. It means we notice things. It means we ask the uncomfortable questions when the margin is slipping or the cash is tighter than it should be. That is not something a platform can replicate, and it is the very thing every failed company in this story underestimated.
It is why our clients tend to stick around, not because they are locked in, but because they can feel the difference between a platform that processes their numbers and a team that actually cares about what those numbers mean.
“Technology changes. Relationships endure. And in accounting, it is the relationship that ultimately determines whether your business gets the financial support it actually needs.”
The Bottom Line
The wave of VC-funded bookkeeping disruptors has crashed, one after another, against the same shore. The companies that raised the most money, built the most impressive technology, and made the boldest claims are the ones now writing farewell letters to their clients.
What they missed was not a feature. It was not a better algorithm. It was the fundamental truth that accounting, real accounting, the kind that helps businesses survive tough quarters and grow strategically, is a deeply human endeavor. You cannot automate caring. You cannot scale curiosity. You cannot replace the judgment of an expert who knows your business and is invested in helping you succeed.
At Basis 365, we never tried to. And we are still here.
Ready to work with a team that actually knows you?
Learn how Basis 365 Accountings's outsourced accounting and bookkeeping services are built around your business. Contact us today.
