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View the finance work around the IPO as a marathon, not a sprint

Going public takes endurance. The whole process—from the decision to go IPO, to the S-1 filing and the roadshow, to the first day of trading and then the post-IPO phase—usually takes longer than expected and puts a major strain on resources. It takes mental strength and stamina to power through the several years before and after the transaction if you do it right.

It’s understandable why so many executives want to take a great big breath when they get past what they view as the finish line—the day the initial public offering is made. But they’ve got to keep going toward the next milestones and transition to truly operating as a public company, as noted by the experts who participated in RoseRyan’s recent webinar, “Smooth Sailing for a Successful IPO.” Senior Consultant Diana Gilbert, who leads the Technical Accounting Group at RoseRyan; Matthew Rossiter, Partner at Fenwick & West LLP; and Susan Berland, Consultant, Finance & Strategy offered up a lot of advice and warnings in the one-hour session aimed at companies contemplating or going public.

“Everybody’s excited, you rang the bell and you feel relieved,” Gilbert said. “You think, ‘Oh my gosh, this sprint, this crazy thing, is over.’ But the reality is you’re actually in a marathon. You’re not in a sprint. Now you’re in a public company.” There’s a lot more to be done.

The run to each milestone doesn’t have to be sweaty and messy. Companies can move forward in a cool and collected way (although, to be sure, there will be some bumps: Download our report The IPO Journey: 6 Potential Obstacles to Avoid for a Smoother Trip to see what we mean) with some best practices tucked into their back pocket.

Here are just a few takeaways from the webinar:

Start early. Decisions can be made in the very early days of the company’s existence that can set everyone up for an eventual IPO. This means nurturing the kind of culture that highly values accurate information and keeps documentation in order. If certain systems are in place and certain ways of doing things are the way of company life early on, that will make the transition easier if an IPO does indeed become part of the company’s plan.

Instill smart habits. Before going public, finance teams should adjust to tighter reporting turnaround times. They can work out the kinks before meeting deadlines becomes an SEC mandate. They’ll need to streamline the close process and begin getting used to recording the work that they do—not just the results.

“Remember a lot of private companies now going public don’t have people who have been through the Sarbanes-Oxley process,” Gilbert said. “They’re not in the habit of documenting everything they do, so while they may be doing it, there’s no evidence of it.”

Know the timeline. Because of the JOBS Act, many companies get some breathing room when it comes to adjusting to all the regulations they’ll be subject to once they get over the first going-public hurdle (most notably, the requirement that auditors attest to management’s review of internal controls, aka SOX’s Section 404(b)).

“Essentially all high-growth IPO companies right now are ‘emerging growth companies,’” Rossiter said. “Any private company with less than $1 annual billion in revenue will be eligible to be an emerging growth company, and will remain an emerging growth company until the fiscal year ending the fifth year after IPO, or potentially sooner when one of several financial triggers hit,” such as the company becoming a large accelerated filer, with public float of more than $700 million.

Anticipate problems. There will be mistakes along the way as the company ramps up to go-public status, and that’s why building in time is essential. “I usually say it’s not whether the company is going to fail on some controls, it’s which ones,” Gilbert noted. “We need time to remediate and fix it and get things running really sleek and clean before you hit that period where you need to be compliant for 404, before you get the auditors involved.”

Want another great tip? Develop a solid finance team with buttoned-up processes and a drive for efficiency and integrity throughout the going-public process and afterward. It’s evermore important when the company has passed the IPO mark and is in the public eye.

“You want to have a solid, solid team in place and make sure that in the process of all of this you are doing things in a disciplined, careful way,” Gilbert said. “That you don’t take shortcuts and you get it right the first time. Because when you are communicating with the outside world, they are not very forgiving if you make a mistake and have to go back and make a restatement. That can be a big negative on your credibility.”

For more sage advice on crafting your successful IPO process, listen to the recorded webinar Smooth Sailing for a Successful IPO.

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Going from good to great: How to be an amazing consultant

Have you ever thought about becoming a consultant? It’s a lot different than being an employee, and that’s what the consultants at RoseRyan love about their role: Our finance pros have joined us for many reasons, with flexibility and variety in engagements being top faves.

Consultants who are great at what they do have the skills required and the experience to match what their clients need, and they have a whole bunch of other must-have abilities that don’t quite fit on the résumé. The following traits are just some the attributes that turn a “good” consultant into a great, in-demand consultant:

1. They get it done. Ultimately clients hire consultants for results—to do the things they can’t do with their current resources. The more ways a consultant can help out, the more valuable a consultant is. The best consultants are always looking for solutions and efficiencies, and they do what’s necessary to finish a project or fix a problem. In some cases this may involve making copies at 7 p.m. to get a report together. There’s no better-than-you attitude here when job-number one is to make the client happy. They do what’s required and follow through to make sure it happens.

2. They add value. Consultants who shine consistently go beyond what’s asked of them. They listen carefully to the client and find ways to make the client’s life easier. A client expects a consultant to be an expert and bring in fresh ideas—but the client may not always know the exact right questions to ask. The best consultants have a sense for what each client needs.

3. They are leaders. You can be a leader without being the one in charge, and great consultants fit the bill. One way to look at leadership is people who take action instead of waiting to be told what to do. They’re effective observers who have the power of persuasion to make smart recommendations when they make sense.

The consultants who understand what the client wants and then makes it happen are the ones who get asked for by name the next time around (we love when that happens!). If a meeting needs to be called, they call it. If tasks need to be divvied out, they do it. No micromanaging needed. Not only do they step back and see the bigger picture, they figure out what must get done and then gather the resources to do it.

4. They stay out of politics. In finance and accounting, in particular, consultants are expected to be discreet. They may a hear a lot of chatter as they work alongside employees who could be struggling to get past politically sensitive issues. Things may have become messy and the consultants are expected to bring in some calm. The best consultants don’t get sucked in to power struggles and office gossip. They do their job and maintain a professional demeanor.

5. They are chameleons. Consultants who get repeat clients are able to fit into any environment, whether it’s a loosely structured startup or a tightly wound corporate culture. They shed their personal agendas at the door and take in the personalities and makeup of the company before making any recommendations. They become a part of the team and zero in on what makes sense for the client, at that moment.

6. They are life-long learners. Clients are looking for people who are on top of the latest requirements and leanings in the field. They want to bring in early adopters who can show them what to do, and they want to know what other companies like them are up to. Consultants can bring them that expertise only if they set aside time to stay on top of trends and innovations. It makes them better at their job—and it makes them more marketable.

7. They are confident but not cocky. Great consultants have an easy confidence that lets the client know “I got this,” but it never strays into arrogance. Clients want to believe the consultants they’ve brought in to fix a problem know what to do. But clients don’t need a big ego to get in the way.

Consultants who have these seven habits are a special group (we call ours the dream team). They’re experts in their field who are willing to do anything they can for the client. They have above-and-beyond attitudes. And they are all about follow-through, professionalism and thoughtful, quality work.

Think you have what it takes? Check out our latest hiring opportunities, and inquire about a career at RoseRyan by reaching out to our talent manager, Michelle Hickam, at [email protected].

RoseRyan can keep track of our consultants’ skillsets and whereabouts because of Matt Lentzner, the firm’s IT guru. He manages the evolution of our internally developed DTS system, a sophisticated scheduling, timesheet and skills management application.

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A 6-point internal control checklist for year end (yes, already!)

Many people say life speeds up as you get older. Maybe that’s why the year-end crunch seems to keep getting tighter. The end of Q3 is upon us and year end is right around the corner. While the company’s SOX testing may be under control, we have some recommendations for your 2015 internal control checklist that expand beyond SOX, and should help set you up for a year end process that runs as smoothly as possible (yes, it is time to be thinking about these issues):

1. Check in on COSO
By now, most companies have transitioned to the 2013 version of the Committee of Sponsoring Organizations (COSO) internal-controls framework, although there are some holdouts. Before you go any further in this checklist, if your company has not yet made the transition, we recommend that you familiarize yourself with the new framework, map your existing controls and identify any gaps.

The Securities and Exchange Commission has not confirmed a timeline for going after companies that have not migrated to COSO 2013, but lack of COSO compliance can still lead to problems. From an internal control over financial reporting (ICFR) perspective, if one or more of the new framework’s 17 principles are not present and functioning, a major deficiency may exist. This would equate to a material weakness under Section 404 of the Sarbanes-Oxley Act. Not something that management, the board or investors are likely to want.

2. See if you need to expand enterprise risk reviews
The latest COSO framework calls on companies to have an operational risk assessment program, and to identify risks that may derail their ability to reach corporate objectives. Most companies record their significant risks in their 10-Qs and the 10-K, of course, but they may need to rethink or expand the information sources.

The assessment should include input from business units and appropriate levels of management. Has the company also created an upward/downward communication route for identifying, documenting and addressing lower level risks that impact smaller entities and regional operations? If not, now would be a good time to make a change.

3. Put out some fraud feelers
Another COSO requirement is consideration of fraud risk. A proven way to address the issue is to conduct fraud brainstorming sessions with various employee groups. It could provide a whole new perspective. When employees are asked to “think like a fraudster” and brainstorm “how a fraud could perpetrate itself at the company,” they may reveal gaps or risks that had never been contemplated on a companywide scale.

4. Evaluate how management reviews controls
For controls that require management review, particularly for complex processes, it’s important to document the steps taken as part of the review process. Supporting documentation will make any auditor questions that pop up easier to handle and could also make the process easier when next year rolls around, or in the event of a personnel change.

5. Touch base with your auditors
Management must evaluate the adequacy and completeness of the key reports used for preparing financial statements. By now, the company should have the list of key reports handy. If you have not already done so, we recommend meeting immediately with your external auditor to confirm that the list is appropriate, while there is still an opportunity to address gaps prior to fiscal year end.

6. Take a fresh look at related-party and significant or unusual transactions
A new auditing standard could bring this issue to the forefront, even for companies that may think they do not have such transactions. To head off extra questions by auditors, companies should consider: Is the board or audit committee aware of all related-party transactions, including suppliers, vendors and customers? What if employees haven’t disclosed them? Does the company have a documented process to assess related-party transactions and determine when disclosure is required?

Here’s a quick trick that could be revealing: Compare employee addresses to vendor addresses to see if there are any matches. While it may not turn out to be a problem, a match could be a flag that requires further investigation.

Be aware that external auditors need to conduct new procedures to comply with Auditing Standard 18—Related Parties (which became effective for audits occurring on or after December 15, 2014), and they will report their results to the audit committee. The report will include transactions they found that the company had not told them about, as well as deals that were not authorized or approved in accordance with company policies, or that appear to lack a business purpose.

Also make a point to review significant or unusual transactions. Is the company preparing memos or documenting the approval and controls process for significant or unusual transactions? Your external auditor needs to report on this as well.

Ideally, these internal control and compliance areas are already a part of your toward-the-end-of-the-year checklist. If they’re not, you may want to start right now. That clock keeps ticking!

Alisanne Gilmore-Allen is a member of the RoseRyan dream team. She is a Certified Internal Auditor, Certified Fraud Examiner, Certified Information Systems Auditor, and she has a Certification in Risk Management Assurance. Alisanne spent over seven years helping Big 4 clients with enterprise risk management, and she has consulted for and headed the internal audit departments at Bay Area technology companies.

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