An initial public offering (IPO) is a highly desirable goal for many business owners and if done correctly, can generate cash and credibility for the continued growth of the business. An IPO also enables a company to use its now publicly traded stock as currency, thereby creating liquidity for its original investors.
Not surprisingly, much of the burden of an IPO falls on the shoulders of the accounting department. For this reason, it’s absolutely critical to have the right accounting professionals in place in order to be successful. Navigating a company through the complicated process of an IPO is one of the most challenging and rewarding tasks an accounting firm will undertake. Consequently, the way it prepares for the IPO — from arranging adequate staffing to making sure its technology is up-to-date to putting the right processes in place — is crucial for accurately achieving success.
3 Essential Steps to Help You Prepare for an Initial Public Offering
1. Assess and Upgrade Your Accounting Firm
The most important part of any accounting firm is its people. While a business’s current accountants may be sufficient while it’s a private company, most businesses need to upgrade this part of their organization in order to be successful as a public company.
That’s why having the right person at the top of your accounting firm is essential. This individual must have a deep understanding of generally accepted accounting principles and Securities and Exchange Commission (SEC) regulations, as well as the ability to communicate with investors once your company goes public.
In addition to sound leadership, it’s also imperative that your accounting firm has sufficient qualified resources, primarily because the close and reporting cycle has shorter deadlines for public companies than for private ones.
At MGA, we highly recommend taking advantage of our F.A.S.T. (Finance Accounting Support Team) group’s outsourced resources to supplement your business’s accounting firm, if necessary. We have the experts, and the expertise, to ensure that this complicated process goes smoothly.
2. Prepare for Financial Reporting
A public company requires accurate real-time financial reporting, and therefore its accounting system must be up to the task. For example, accounting software such as QuickBooks and Excel spreadsheets used by smaller companies for tabulating important accounting records will likely not be sufficient once a company reports to the SEC. That’s why for accuracy and peace of mind, we recommend that any accounting system upgrades should be done and tested prior to going public.
3. Improve Processes and Implement Controls
A strong accounting firm not only has good processes but also effective internal controls that are both designed and operating effectively. This also needs to be true for a public company. In fact, the chief executive and chief financial officer of a public company must certify this in the company filings.
In addition, many public companies must obtain an annual report from their auditor verifying that the company’s internal controls are designed and operating effectively. At MGA, this is something we specialize in, and our experts are ready to assist you with improving, documenting, and testing your company’s internal control structure.
Are you considering an initial public offering?
If you are contemplating an IPO, MGA is ready to help, with a wide variety of assurance services that are designed to take the complexity out of taking your company public and to help you avoid any costly missteps. We are here as your trusted advisors, no matter how simple or complicated your situation.
Our team of accounting and assurance experts will walk through the process with you, making sure you achieve the best possible results from your IPO. We are here to make your complex situations simple. Let’s talk! Call us at 713-622-3960.