Going Public? Heed This Advice From Connor Group

Talk about putting your money where your mouth is. When you see how well Santa Clara-based Connor Group has done since its 2006 start, it’s no surprise that the accounting firm’s specialty is servicing high-growth clients. The company, which is made up of Big Four alumni and industry executives, lists more than 400 clients on five continents, and boasts a 50-percent share of all Silicon Valley IPOs.

In managing its own growth as well as its clients’, Connor Group’s believes that success depends on the quality of what it calls  “people, processes and systems,” and that this principle is key to public-company readiness.

Take it from Deepika Sandhu, a partner in the company’s Financial Operations practice. That Connor Group believes in hiring top people is evident in Sandhu, who joined four years ago and was recently named a Woman of Influence by the Silicon Valley Business Journal.

Sandhu acknowledges that hi-growth companies are unique not just in the high expectations they engender, but also in the challenges they share.

“Often, these companies did well by focusing their energy on the front of the house,“ she says. “They’ve been building products, doing R&D, sales and marketing, things like that. But they haven’t paid as much attention to the back of the house – to the accounting and financial systems.”

“For a company looking at an IPO it can be a shock to realize that as a public company you’ve got to do your month-end close in just 10 or 12 days,” she says.

“That’s what the Street expects. Investors want to see timely reporting, and correct reporting. Creating accurate, reliable and timely financial reporting is a big shift for companies that aren’t used to stringent reporting deadlines.”

Another challenge for pre-IPO companies is getting ahead of historical and ongoing accounting processes. Fixing historical accounting means going back and resolving open audits or other loose ends. Keeping up with day-to-day accounting during an IPO process can be a challenge because of the additional demands on the accounting department.

“Many high-growth companies simply can’t keep up with their day-to-day accounting, for a variety of reasons,” Sandhu says.  “Transaction volumes may be growing. You might not have enough people. Then you’re taking a highly manual process and putting it through an IPO. These things can make it tough.

“Meanwhile, the IPO process can last four to six months or more, and require periodic updates to financial results. If you can’t keep up with all the moving parts, the IPO could be delayed.”

The way to address these challenges is to take stock of your company from the people, process and systems perspective and see what needs fixing before you begin the journey to becoming
a public company.

“For people, you need to ask if your team has the skills to be successful as a public company,” Sandhu says.

“What training does your team need or what new skills need to be added to perform at public company standards? For instance, we often see skills-gaps in revenue recognitions, SEC reporting and general technical accounting. We preach hiring the best people you can, and bringing them in sooner rather than later.”

As for processes, Sandhu notes they should be both workable and scalable, and they should be evaluated before layering on automation. For example, look into some of the highly manual, time consuming processes that exist in the accounting department to see if they can be improved.

Also, look for process bottlenecks in places where the accounting system interfaces with external systems. An example is an upstream sales commissions process that relies on people in sales to provide commissions calculations to accounting for appropriate recording.

“Something like that can take days to get to accounting, and then the information can change a day later, leading to rework during the close” she says. “Ask yourself what can be done to create a more timely and accurate process.”

Technology such as BlackLine’s can bring significant value to automating a close. Automation can help speed up processes and greatly improve accuracy over manual efforts.

“I like to refer to what I call the ART of the close,“ Sandhu says. “That’s A for accuracy, R for reliability, and T for timeliness. That’s what companies need for their close, and that’s what BlackLine’s automation supports.”

BlackLine can help companies make better use of their finance people, too.

“Layering on BlackLine helps the company focus its efforts on the most important areas,” she says. “By auto-certifying certain accounts and creating rules to match transactions, BlackLine lets the accounting team focus on the things that really require their attention.

“For example, you may not need to look at that account with zero balance or no movement over the prior month. But you might want to focus on some of the more complex areas, like revenue or accounts that are falling out of their normal patterns.”

Technology can also free up people to contribute more to the company’s strategic needs. Sandhu points to the growing power of analytics as an example.

“In addition to good people and strong processes, systems like BlackLine can help CFOs contribute to the business by producing analysis that gives executives confidence to drive business decisions and influence company behavior.”