Navigating the IPO: The Accounting Manager’s Role
Mar 08, 2016 | By Chris Sluty
For many growing organizations, the Initial Public Offering (IPO) is a beacon of success. Your company has ramped up sales, built strategic relationships, sustained growth, and is ready for the big show. With a fresh infusion of cash, it’s time to take the business to the next level.
Going public is a notoriously long and complicated process. It’s also one of the most rewarding experiences in accounting from both a professional and financial perspective.
Everyone knows the end game is to ring the bell, but actually going public is a bit of a mystery. This is the second post in an interview series with various members of Finance and Accounting departments, discussing every aspect of the IPO process: Selecting bankers, drafting the S-1, preparing taxes, FP&A, optimizing month-end close, quarterly reporting, growing a team, and getting SOX compliant. I recently spoke with Josh Scott, CPA, about what Account Managers need to know about going public.
What is the accounting department’s role in the IPO process?
Accounting’s role is to provide reporting that is detailed and accurate. The valuation will be based on forecasts by the FP&A team and the starting point for a good forecast is accurate historical data provided by the accounting team. On the reporting side, accountants must be ready to handle strict quarterly reporting deadlines. It is important to be in the habit of operating in a deadline driven environment pre-IPO.
How did your department get ready for the IPO?
The IPO process will take about 18 months to 2 years of time and all your timelines will shift by 3-4 months. Bankers will set deadlines and then you can set a timeline based on those dates. Your department must be able to be flexible. You have your normal day-to-day work along with the month-end close process, and in the middle of all of your normal job duties there will be one-off tasks that the bankers request. You really need to set these expectations with your team, there will be peaks and valleys with your time but your hard work will pay off when the IPO happens. If you have good data and a good close process in place you shouldn’t need the staff and senior accountants’ full attention on the IPO. If your close process isn’t a well-oiled machine at this point, time constraints will exist and put a major strain on your people.
What’s the most important factor for success?
Clean data. Do I have clean data for reporting purposes? All financial information not only must be accurate, but it must also be timely. Getting into the habit of working against hard deadlines is imperative for any department wanting to take the leap to the 10-Q & K reporting schedule. Once you’re in the big leagues, missed deadlines or inaccurate data leads to dips in stock price which can dramatically affect the company’s growth.
What advice would you give an accounting department at a pre-IPO company?
Be honest with your team and CEO about how ready you are. Really understand your timeline, and set goals that you want to achieve as a team. Can we handle this all in-house? Do we need to hire consultants? Explain that the process will be challenging and a lot of work, but the more upfront you are about the task at hand the better your team will respond. Explain the benefits of an IPO for the individual on the team and get their buy-in. It’s an exciting time in the lifecycle of the company and each person will play a huge part in future success.
Read the rest of the interview series: