Another biggie on the to-do list is the 800-pound reporting gorilla now sitting in your lobby. While it’s probably no surprise that your reporting requirements significantly expand post-IPO, many first-year companies are still caught off-guard by just how much they’re now expected to do, especially on the – you guessed it – SOX front.
Of course, all companies are different so it’s unfair to say that every team in every organization is unprepared when it comes to financial reporting. To that point, businesses that fast-tracked their IPO or maybe went from a small business or startup to public entity in a short amount of time are typically the ones that struggle, at least at first, with public company reporting, mostly around:
- Management’s internal controls, including addressing deficiencies or material weaknesses
- Compliance and reportingfor SOX
- Additional accounting and reporting considerations under US GAAP and SEC regulations
- Calculating and monitoringpublic float and filer status, ex. non-accelerated vs. large accelerated
- Timeline management for 10-K,10-Q, and other regulatory filing deadlines
Choose and Implement a Robust Reporting Tool
That last bullet point, timeline management, can wreak a special brand of havoc if you don’t prepare for your reporting well in advance. That’s whyshared filing calendarswith mapped out task deadlines and designations are so essential.
Remember, reporting is an iterative, collaborative effort that only requires a single weak link to throw the entire process into a backlogged, inefficient mess. And, no, we’re not exaggerating when we say that. Efficient, accurate reporting relies on many different groups – both in-house and outside – to work in unison with one another.
Remember, reporting is an iterative, collaborative effort that only requires a single weak link to throw the entire process into a backlogged, inefficient mess.
As a best practice, a reporting solution can streamline nearly every facet of your reporting function, including collaboration. While we prefer Workiva’s Wdesk suite here at Embark, there are certainly others in the marketplace to choose from. Just make sure that whatever you ultimately pick, it features those essential collaborative tools so your team stays locked in and on track.
In other words, Wdesk is a good place to begin your due diligence. However, your goal is to find a solution and vendor that check the most boxes for your specific needs. A streamlined, efficient, and reliable record to report process can be a massive benefit to you as a new public company, and technology can play an essential role in helping you achieve those goals.
Wdesk is a good place to begin your due diligence.
Start the Reporting Process Early
Another common reporting snag for newly public companies is the short amount of time you have until your first filing. The 10-Q or 10-K might be your firstmajorfiling milestone, but not necessarily your first official filing. Depending on the circ*mstances, you could very well have to file an 8-K or some other more ancillary form before the reporting heavyweights.
Naturally, that means many companies won’t have an awful lot of time to get their reporting calendars or software solutions up and running. Ideally, you’ll start planning for such things in thepre-IPO stageto prevent a manic rush afterward. Granted, the fast-paced days before your IPO are usually filled with their own unique brand of chaos, so do your best.
However, if the 10-Qisyour first filing, the good news is that you’ve already completed much of the legwork in the prospectus to yourS-1 registration statement. Even so, a critical best practice is to start ramping up your reporting function as early as you can. Otherwise, your entry into life as a public entity could go through some rough seas. And reporting delays right out of the IPO gate don’t provide much confidence to an investment world that is still getting to know you.
Don’t Take Emerging Growth Company Status for Granted
Qualifying foremerging growth company statusgives you a fair amount of breathing room for adopting new accounting principles and some reporting requirements. But in thegood problem to have department, some companies just grow too fast to enjoy the benefits of the status for long. And when that happens, you don’t have a lot of time to adjust to your new SEC surroundings.
Thus, you need to keep an eagle eye on that emerging growth company status because, once you lose it, you’re officially off of that comfy private company adoption schedule and relaxed SEC reporting requirements that emerging growth company status provided. That means, per your friends at the Financial Accounting Standards Board, you have the next reporting period to adopt any new standards already effective for public companies which, naturally, affects your reporting.
XBLR Tagging
As a more granular best practice that many companies overlook, your XBLR tagging requirements can be a mighty chore in and of themselves. If you don’t have the in-house experience to effectively handle them, that’s an area where a third party can be a lifesaver. No matter how you choose to address this responsibility, though, keep in mind that it’s a time-consuming process that you should add to your filing calendar to ensure it doesn’t cause delays and add another complexity to the run-up to your shareholder meeting.
Rely on Experience and Expertise
Speaking of lifesaving third parties, many private sector companies don’t have the size or skill-level in their in-house groups to immediately handle external reporting or technical accounting requirements, at least with sufficient expertise. And that’s not even taking into account your new internal audit and compliance teams. Obviously, it’s absolutely vital to build-out these teams and skill sets as much as possible so you can hit the ground running.
Zooming in further, the additional requirements and higher stakes with SEC filings are a different animal than most previously private companies are accustomed to. In fact, aside from new, unfamiliar reports, just the sheer volume of reporting is a big enough hurdle for many companies to stumble over.
Of course, that’s why Embark’s team of fleet-footed reporting experts exists – so your accounting managers and staff don’t get so overloaded and overwhelmed, your team dissolves like a sugar cube in boiling water. Burnout is real and poisonous as arsenic to a company still trying to gain its public entity footing.
