IPO Prep – A critical step

Discussions have been ongoing for weeks, perhaps months. The exciting yet nervous time when the Board and Executive Management discuss the possibility of taking the company public. A few staffing changes are considered in order to strengthen known weaknesses in Accounting or IT, sometimes the CFO that’s been with the company for years is changed out for a “Banking” focused Executive. External auditors are selected and suddenly everyone has more work than they know what to do with, but have a promise of better days and some financial benefit for pushing through the process.

Accounting processes are polished up, headcount is increased to include an SEC Reporting Manager, Investor Relations Manager and other similar functions. A heavy focus is put on getting the financial statements and other documents ready for the auditors to review and eventually an S1 or similar document is filed. An important component is mentioned a few times during this process but is always pushed to the back burner. That is, until the auditors find an error in the S1. Then “Internal Controls” and “SOX” are suddenly thrust into the spotlight.

If the initial filings go smoothly you still have the auditor’s comments stating your current internal control environment is insufficient. Now you have to start fixing the mistakes, slow down the IPO process, add headcount (again) to cover segregation of duties issues, and pray your staff can handle more weeks of 60+ hours than you originally promised.

If you’re in this predicament you’re tempted to contact a Big 4 firm to help implement your internal controls (after all, your Big 4 external audit team recommends you use another Big 4 team so it must be the best option, right?).

If you haven’t reached this critical point yet, then hopefully you’ll take steps to prevent this major stumbling block. Being proactive in addressing the inevitable need for internal controls can help your IPO process go much smoother. Giving you a better picture of what your staffing needs will truly be post-IPO and improve your early relationship with your external auditors.

In either case there’s no need to over-spend utilizing a Big 4 team. Utilizing a team of experts who have a minimum 10 years of experience in financial, IT and operational controls will give you the support and knowledge to navigate the risks and difficulties ahead. We can also help fix any issues which have already been identified in the most economical way possible.

Whether you’re in the pre-IPO stages or in the middle of a 60 hour work week with no end in sight, e-mail us at thomas@r-vmc.com or call us at 936-494-5135 and let us help.