IPO Readiness: More Than a Flip of the Switch

Are you ready for an IPO?

According to BlackLine CAO Patrick Villanova, that’s a good question to ask.

“Even if you’re not planning an IPO any time soon, you should strive to manage Accounting as if you’re already a public company,” he advises. “That will pay major benefits. You’ll have a better-run company, and when the time comes, you’ll be IPO-ready and less at risk of mistakes that could hinder your public offering.”

Villanova, who played a key role in BlackLine’s own IPO, recommends that companies focus on these three areas to maximize IPO readiness.

Practice operating as a public company to identify any talent gaps. Assess whether you need new skills, additional hires or more training, or if you need additional headcount to handle the new requirements, processes, and documentation.

Strong controls are always a good business practice. Even if you aren’t subject to SOX requirements yet, implementing comprehensive controls while you‘re still a private company increases confidence in your company for auditors, investors, and others.

You also have the opportunity to identify and mitigate risks internally, without the scrutiny of external auditors and the public.

This will equip Accounting and Finance to organize and facilitate existing work with added control and efficiency. This investment will also prepare your F&A teams to take on future work as your accounting complexity and volume grows and your business evolves.

“Once your IPO is in play, what’s been going on behind the scenes and on your financial statements may suddenly be subject to rigorous scrutiny,” Villanova says.

“The problem for many companies is that they’ve been allocating resources to product development and go-to-market activities. Now, Finance and Accounting is taking center stage.

“They’re facing a new level of scrutiny from investors, the SEC, and others, and there’s little tolerance for errors.”

With an upcoming IPO, the efficiency of the close process takes on new significance. As an example, here are the expectations for an IPO-ready close:

•     All “subledger or sub-system” entries are posted, closed, and reconciled

•     All journals and month-end entries are posted

•     All key balance sheet and key P&L accounts are analyzed and reconciled

•     The financial analysis is completed

•     Management reviews are performed

•     The reporting package is completed and submitted

•     All of the above are completed with zero post-close audit adjustments

“Going public isn’t just a flip of the switch,” says Villanova. “It requires careful preparation. But by starting early, by implementing best accounting practices, companies can improve their efficiencies for today and be ready for tomorrow, when they may decide to hold a public offering.

“For now, the best thing companies can do is subject themselves to SEC reporting deadlines and the rigors of SOX internal controls testing. They can then leverage these experiences to identify the gaps in people, processes, and systems and make the necessary investments, not just for today, but for two to three years down the road.

“Then, as the confetti rains down on the floor of the exchange, executives will sleep easy knowing that the next day they’re prepared to lead their newly public company.”

Join us for this webinar with Connor Group to learn more about how to set up Finance and Accounting for a successful IPO.