In part one of this blog, we outlined how to shut down the legal and tax portions of a startup. Unfortunately that is not the only action needed to wind down a company. Here in part 2, we’re going to walk through best practices for closing out the back office. When it comes to closing out a startup, there are a lot of moving parts. Aside from tax services, airCFO offers accounting & finance support to our clients, so we tend to spend a lot of time helping startups build out their back office. Here are some of the systems & processes you’ll want to work through as you wind down your back office:
Payroll & Benefits
Work with your payroll provider (e.g. Gusto or Rippling) to make sure after you wind down that employees and contractors will still be able to access their W2s and 1099s after the current calendar year. Once this is done, you can suspend or pause the subscription fee to avoid paying future monthly charges if you aren’t running payroll.
Similar to the actual payroll service, here are common add-ons to the actual payroll platform that will require you to understand how to suspend service, but also still understand how long (soon-to-be former) team members can still access the benefits and/or what they need to do to get access to their own accounts:
- Medical, Vision and Dental insurance
- FSA or HSA accounts
If you are filing bankruptcy and unable to meet current and future obligations, you may need to keep your payables platform open as the legal process unfolds; otherwise you should notify vendors if you are unable to make payments and also turn off the subscription to the platform once you’ve extracted all your historical invoices and accounts payable history. Most of our clients are managing accounts payable on a platform such as bill.com, Divvy, Brex or Ramp.
CRM, Revenue, & Accounts Receivable
The most common platforms our clients use to collect money include: Stripe, PayPal, and Shopify. None of these charge a monthly fee, so there isn’t much rush to shut these down.
Banks & Credit Cards
Leaving a checking account open isn’t a bad idea to handle the long tail of some expenses & payments that will inevitably come through for the next few months, but we’d suggest at least canceling company credit cards to stop all recurring charges you will no longer need (e.g. monthly SAAS subscriptions that renew each month).
If you are paying for Carta or CapTable.io and it isn’t necessary any longer, we’d suggest shutting it down.
Similarly, unless there is a legal obligation to keep business owner’s insurance, D&O, or E&O insurance active, we’d shut it down to avoid future expenses. You may be able to get a refund for unused premiums in some cases.
There is nothing fun or easy about arriving at the decision to wind down your startup, but a lot of people (employees, contractors, vendors) depend on you, so planning ahead and being transparent will go a long way in ending the relationship on a positive note. For example, giving employees as much notice as possible will help them avoid a rushed job search or to have to file for unemployment. For suppliers, even if you can’t pay all your bills, at least giving a couple month’s notice will allow them to plan for their own cash issues. For your Board and Investors, you may very well still retain their confidence or trust if you are honest and transparent about the situation. It may be cliche, but failure is a part of life, and here at airCFO we are here to offer you guidance if it’s ever time to wind down your startup. Contact us if you have a question we can answer for you.