Life as a public corporation is far different from that of a private company. A successful IPO opens the door to some exciting business opportunities. However, once your company is public, financial reporting takes on a heightened level of importance and you will face a new level of scrutiny.
So if an IPO is your goal, it’s critical to build an infrastructure that is ready for the rigors of the public markets. Develop a robust infrastructure comprised of people, processes and systems that will enable the production of timely, accurate financial information for purposes of forecasting, financial reporting and compliance with new public company regulations.
Here are five important steps in that preparation process.
1. Financial reporting: Often, newly public companies find it a challenge to produce financial statements and disclosures, along with completing the necessary executive-level reviews, under the new regulatory reporting timelines. Start early to comply with local securities laws, and consider potential IPO accounting and reporting issues. Also, practice preparing your quarterly and/or annual financial statements on an SEC-ready timeline as if you were already public for at least 2 quarters prior to the IPO.
2. IT systems: Information systems need to be aligned both with the company’s business objectives and critical reporting requirements. Management should have the informational tools that allow for timely reporting, informed decision-making and the ability to quickly answer analysts’ questions.
3. Internal controls: Develop written financial accounting and SEC reporting policies and procedures to support your public company internal control environment. At least 12 months prior to the IPO, begin executing a plan to complete management’s assessment of internal controls over financial reporting.
4. Forecasting: During quarterly and annual conference calls, shareholders and analysts will want to know your earnings guidance. So start now to improve your budgeting and forecasting capabilities and enhance management and financial reporting capabilities.
5. Housekeeping: There’s no time like the present to start getting your house in order. Also consider whether your existing corporate, capital, and management structures are appropriate for a public company.
Worth the effort
The experience shows that a strong infrastructure can help facilitate regulatory compliance, protect against risk exposure and provide guidance to meet or beat market expectations. Furthermore, such an infrastructure can ensure that business execution continues apace despite the focus on the IPO transaction.
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