The current generation has been a hallmark of tech and software IPOs. Unicorns like Lyft, Uber, CrowdStrike, Slack, WeWork, and Zoom just filed for IPO. These companies alone were expected to post an IPO market by $200 billion for 2019. On this page, we’re going to focus on NetSuite ERP’s role in enhancing your company’s readiness for the IPO process.
1. Organizes Your Finances for Software IPO
In your preparation to file for a software IPO, Your Business must get its financial foundation adequately laid before submitting form S-1. Also, your audited financials for the past three years are among the primary requirements subjected to Securities and Exchange Commission’s thorough review. Other standards that require close assessment include EITF 08-01 and 09-03 alongside ASC 60.
NetSuite is an outstanding ERP financial multitool that can help in preparation for software IPO. If it’s your first time considering NetSuite, then be informed that one-third of companies that applied for software IPO in the financial year 17/18 was NetSuite customers. Interestingly enough, most companies that used NetSuite have accessed better compliance foundations.
Also, NetSuite is easily customizable and quicker to update audit trails. Another advantage of NetSuite is that it takes less time to discover issues that could affect security, controls, and financial statements.
If you were afraid of NetSuite’s ability to allow your business to comply with ASC 606 standards, there is no need to worry. NetSuite is subscription-based. Therefore, it comes with the experiences to adjust to this new standard even with the underlying challenges.
NetSuite ERP software has been updated to deal with ASC 606, allowing you to manage your complex enterprise processes. Within NetSuite is tax compliance for 50+ countries and multi-currency management support for almost 200 currencies.
Apart from the compliance, NetSuite ERP allows you to eliminate inefficient and manual reconciliations and month-close processes. Therefore, your business can align billing, multiple order, and revenue recognition accurately and in a timely way.
Because of NetSuite’s Financial Report Builder customizing functionality, financial reports are more flexible because the data on these reports are real-time. NetSuite’s ability to offer better accuracy and efficiency with your finances relieves the pressure of getting ready for IPO. Also, it improves your ability to produce quick quarterly reports after going public.
2. Increases Your Scalability
For a worthier investment, you need to show that Your Business is scalable. Before software IPO implementation, you have to confirm that your enterprise can withstand more complex transactions and the troubles of going public. The systems that you have used to get your business to its current position may not be able to get you to the horizons.
Moreover, maintaining the same third-party systems can be risky because of the security vulnerabilities, upgrades, and patch requirements as well as data loss threats from your enterprise’s growth.
At first glance, investors need to see your company operate flawlessly. This does not mean that the focus will be on accounting and financials only. One section with issues in Your Business could significantly affect the valuation. Therefore, it only makes sense to adopt a more unified and scalable system like NetSuite.
So, what can NetSuite contribute in terms of scaling your enterprise for software IPO?
NetSuite is a business management suite fully integrated for thousands of tech and software enterprises in the world. Apart from financials, NetSuite’s modular structure allows your company to remove and add modules to grow and consolidate alongside your business. Things like inventory management, eCommerce, HCM, manufacturing, and CRM will be integrated natively.
Any customizations made previously are carried forward with every upgrade to avoid your company processes’ massive disruption. Also, NetSuite is cloud-based hence making it available anywhere as long as you have an internet connection. Furthermore, NetSuite supports multiple currencies and subsidiaries across global operations, meaning your company is powered to grow internationally. Other convincing factors could enhance interest from investment communities if leveraged appropriately by executives at a roadshow.
3. Assembling the Right Team for IPO
Preparation for a software IPO can be a long and tiresome exercise. The best approach is to have the right team in place to make things easy for you. These teams require the right collaboration of subordinate and management roles, even better, a few with public and fast-growing companies’ experience.
The idea is that an upgrade in your team creates a unit ready to handle the performance required and the scrutiny faced by similar public enterprises. Your team could encompass a director of investor relations, an SEC reporting manager, an auditor, a treasurer, a controller, and heads of financial reporting.
Best practices could mean assessing your company’s board and ensuring that you cannot deal with investors with no IPO experience. Immediately, implement a transition that delivers a mix of independent board members to assist your company in complying with bourse and SEC regulations.
But what role does NetSuite play in all this?
NetSuite comes with about 100 already configured roles and reports with business intelligence and dashboard reports. Therefore, your software IPO team members can hold a customized position and relevant key performance indicators (KPIs) on real-time dashboards. Moreover, they could generate reports using metrics with particular tasks and responsibilities related to the IPO process. Then, NetSuite will bring together the major business processes such as HR, ERP, CRM, and Inventory Management using a secured interface. On NetSuite, managers and different personnel can scour the various areas for possible deficiencies that require attention.
FAQs
How can businesses ensure ongoing visibility into recognized revenue as the new rules take effect?
To ensure ongoing visibility into recognized revenue as the new rules take effect, businesses should implement real-time dashboard monitoring. This dashboard should allow for continuous tracking of recognized revenue, breakdowns of revenue components, and detailed insight into individual transactions. By having this visibility, companies can maintain confidence in their financial reporting accuracy, constantly assess Estimated Selling Prices (ESP) reliability, and promptly address any unexpected issues. Furthermore, businesses must be prepared to handle the increased complexity of revenue and deferred revenue reporting under the new regulations, especially when segmented by region or product line.
What types of revenue should businesses be ready to manage and recognize under the new rules?
Businesses need to be prepared to manage and recognize a variety of revenue types under the new rules. This includes revenue streams such as time-based revenue, percentage of completion revenue for services, event-based revenue, and various other potential revenue sources. It is essential for businesses to conduct a comprehensive assessment of their revenue streams and ensure that their financial processes and systems are equipped to handle the complexities of managing these different types of revenue effectively.
How can businesses align sales quotes with financials to manage revenue allocation effectively?
To effectively manage revenue allocation, businesses must align their sales quotes with financials by ensuring that their systems and processes support the accurate alignment of sales amounts with the corresponding financial data. This alignment is crucial for not only preparing accurate financial statements post-sale but also for forecasting revenue projections. It is imperative for businesses to have the flexibility in their systems to manage sales amounts presented to customers, ensuring that these figures are accurately allocated to create value and be recognized in the financial records correctly. Therefore, businesses should establish robust processes that enable the seamless alignment of sales quotes with financials, allowing for accurate revenue allocation and recognition.
How has NetSuite positioned itself to support the recent changes in revenue recognition rules and requirements?
NetSuite has positioned itself effectively to support the recent changes in revenue recognition rules and requirements by ensuring that their own business operations are run on the NetSuite platform. This strategic decision allows them to quickly adapt and leverage the new rules. NetSuite has proactively aligned their system to accommodate the changes in revenue recognition standards such as EITF 08-01, EITF 09-03, SOP 97-2, SOP 98-9, and EITF 00-21.
Moreover, NetSuite’s focus on ensuring that their financial and operational systems are not impediments to adopting the preferred revenue recognition method enables them to concentrate on revenue generation rather than dealing with system complexities. They have developed standalone cloud-based applications specifically designed for revenue recognition, catering to companies that require additional functionality within their existing ERP systems.
Collaborating with system integrators specializing in connecting NetSuite with other ERP applications like SAP, Oracle, and Great Plains, NetSuite offers a more efficient and controlled approach to implementing the new rules. By automating data collection from multiple systems, NetSuite can generate accurate revenue recognition journals, streamlining financial processes for enhanced precision and timeliness.
Conclusion
Successful implementation of software IPO depends on your readiness to respond to change. Your Business should develop frameworks and strategies to help in the entire software implementation life cycle. to get clear insight on software IPO implementation, contact us at hello@seibertconsulting.com or 760-205-5251.
