The Keys to an Enduring Financial Foundation

Executive summary 

For thriving businesses, the initial public offering (IPO) is a major milestone, as your company receives a capital infusion and undergoes a far greater degree of financial scrutiny from auditors, regulators, and investors. In most respects, the reporting, process, and control burdens fall on the shoulders of the CFO, controller, and the rest of the finance team. And those responsibilities begin well before the watershed date when shares are traded for the first time. This white paper describes the 4 keys to IPO readiness: streamlined financial processes, robust internal controls, a skilled financial staff, and best-in-class business systems. But it’s important to remember that the IPO isn’t the finish line. In most respects, it’s actually the starting line, marking the beginning of new demands on your people and processes. This white paper will also discuss post-IPO considerations using the experiences of executives who have successfully taken their companies public. You’ll learn about the essential requirements for fast and accurate financial reporting, regulatory compliance, forecast accuracy, and data visibility. 

Getting ready for the IPO 

For most executives, the IPO represents the culmination of a long, successful journey from start-up to market-proven success. But preparing for the IPO is generally one of the most challenging processes a business leader can undertake. The large volume of challenging financial preparations leaves many finance leaders unsure where to start. The best place to begin is with your Financial system. Smart preIPO firms start to use a modern, IPO-ready financial management system at least 12 to 36 months before the planned IPO. Entry Level accounting software like Intuit QuickBooks may have been valuable during the early months of a small company—and perhaps could even stretch to handle a few elements of the IPO process. But it’s absolutely infeasible to build a corporate IPO process on QuickBooks. Similarly, you don’t want to rely on outdated and inflexible legacy financial systems lacking features and reporting capabilities you need. You want to avoid employing your finance team just to manage all the reporting and analysis work that your legacy system is incapable of handling. A dynamic, cloud-based financial management system ensures that you, your team, and your system are ready to handle the rigors of the IPO process and keep your staffing level low as you prepare to go public.

Pre-IPO key no. 1: streamlined financial processes 

Public companies must be able to close the books in a timely fashion and create the financial statements. Leaders of companies on the cusp of an IPO understand that the company needs streamlined financial processes and a robust financial management system to handle the scrutiny of the IPO disclosures and financial reporting before and after the big event. A modern, cloud-based financial system enables your company to be IPO-ready with financial statements built on well documented, carefully organised transactions and balances. The best cloud financial systems make it easier for you to trace all financial activity from the original transactions and supporting documentation through the business processes and into the financial statements for faster closes, accurate financials, and easy auditability. A modern financial management system automates functions like order processing and consolidations, preventing (or, at minimum, delaying) the need to hire added financial staff. Eliminating the use of spreadsheets for processes such as revenue recognition or currency conversions ensures a greater level of accuracy and stronger compliance with accounting standards. In addition, look for a system with powerful and flexible reporting capabilities that enable you to meet statutory reporting requirements as well as your own management reporting needs. 

Pre-IPO key no. 2: robust internal controls 

IPO preparation requires a robust set of internal controls that demonstrate the effectiveness of your accounting and reporting processes. For example, you must document and follow approval processes for POs, employee expenses, sales contracts, journal entries, and more. Proper financial controls ensure these transactions cannot be completed without proper approvals— every time. A system of checks and balances (segregation of duties) ensures no single individual has control over all parts of a financial transaction—and generates the audit trail to prove it. One key to IPO readiness is complying with the guidelines of the Sarbanes–Oxley Act of 2002 (SOX). Under SOX, publicly traded companies undergo a strict audit of their financial information and the internal controls they use to determine how well the company establishes and maintains adequate management controls over its operational and financial information. Part of your pre-IPO ramp involves preparing to comply with the many provisions of SOX, which can take 12 to 24 months before the IPO. The right financial management system should assist you in your SOX compliance and audit process. For example, you need to demonstrate to SOX auditors who can access financial systems, what tasks they can perform, and who can enter and edit data. SOX compliance also requires you to show the history of changes to system access, settings, and data. Your system should let you report on these settings and activities to clearly demonstrate that proper controls are in place to govern finance and accounting processes. 

Pre-IPO key no. 3: skilled financial staff 

Too often, a pre-IPO company perceives that it must significantly expand its finance team to meet the coming challenges. However, with a modern financial management system, most companies can comfortably manage their growth without hiring extra staff because there’s no major increase in manual work. With a more efficient closing process and stronger reporting, finance can focus on analysing the unique dynamics of the business, not merely churning out basic reports. With time to truly understand the nature of your business, you can focus on the new skills you need to develop or hire to prepare for the IPO and beyond: budgeting and forecasting, treasury, and SEC reporting. 

Please find out more by downloading the Whitepaper below.

Contact us at Akuna Solutions and explore with a Sage Intacct implementation specialist how to leverage the most modern technology available today to support your organisation’s mission. 

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