It’s no secret that IPOs require a lot of preparation, yet most companies still underestimate the amount of time it takes. Many end up delaying their target date. Conventional business wisdom says that your organization should act and operate like a public company for at least a year before the IPO event — but did you know that your finance and accounting processes should be upgraded and in place two years before going public?
In the IPO process, the finance team takes center stage and the CFO is the star of the show. “Because CFOs are central to the preparation process, they have to play a more visible role at companies preparing to list on the public markets,” says CFO Magazine. “During the IPO process, along with chief executives, CFOs become the face of their firms.” The CFO must have the support of a skilled team that can handle the rigors of becoming a public entity while maintaining day-to-day finance operations.
Below are three major steps that the finance team should start carrying out now: strategically assembling the right people, processes, and technology. The best assurance of post-IPO success is being ready early, so when market conditions are ideal and timing is opportune, the company can file with the SEC.
1. Start producing audited financials now.
Before your company can file its intent to go public, you will need to produce three years of audited financials. The sooner you have a system in place to support audits of high-quality financial data, the more you will save on audit costs. These fees grow steep when auditors have to sift through three years of data.
Save the headache and expense by proactively automating your current processes and getting your historical data in order. Depending on the data quality, you may be able to use one or two years of your historical data in the three years of records presented to the SEC.
2. Structure your finance organization and internal procedures.
The finance team as a whole must have the skills and cohesion to pull off a successful IPO, and that means making sure each person is in the right position with the right job description. But it’s more than a team-building exercise — it’s preparation for Sarbanes-Oxley (SOX) compliance. One of many internal controls mandated by SOX is separation of duties, meaning private companies typically need to redistribute tasks across the staff.
Assess your team’s readiness for operating like a public company, including strengths, gaps, and distribution of duties.
3. Put an automated system in place to ensure accurate financials and timely reporting.
Manual accounting and budgeting processes hold too much risk for a public company, being error-prone and time consuming, and Excel is not built to scale with your growing business. An automated system like Oracle Hyperion provides the last piece of the people-processes-technology trifecta.
The proper IT infrastructure covers several bases:
- Minimizes audit fees during the IPO process
- Helps leadership to truly understand the business before forecasts and performance are placed under public scrutiny
- Equips the finance team to meet new deadlines and financial reporting requirements
- Provides the top-down visibility required internally and externally
- Protects the CFO, who is held liable for the accuracy and integrity of company financials once the Section 404 form is signed
- Prevents material misstatements post-IPO and going forward
The Oracle Hyperion product suite is a one-stop shop for companies planning to go public. Its financial consolidation tool, Hyperion Financial Management (HFM), enables finance teams to rapidly consolidate and report financial results, meet global regulatory requirements, and deliver confidence in the numbers.
Financial Close Management (FCM) is designed for centralized management of period-end close activities across the extended financial close cycle. FCM helps you manage all financial close cycle tasks, including ledger and sub-ledger close, data loading and mapping, financial consolidation, account reconciliation, supplemental schedule management, tax/treasury, and internal and external reporting processes.
- Learn proven productivity tips for your finance department from Mark Smith, Manager of Financial Reporting Systems at BorgWarner. This multi-billion-dollar company cut its close cycle in half, drastically reduced reliance on IT, and uses its financial reporting system for everything from SEC reporting to sales forecasting to treasury reporting.
- Wherever you are in your IPO journey, our advisory team can help you prepare for success with a roadmap to going public.
- Interesting in implementing or optimizing Oracle Hyperion tools? Our EPM consultants can answer any questions you have.