Congratulations on your initial public offering! The bell has been rung, and euphoria is in the air. Now that the confetti have settled, the real work of running a newly public company begins. The first 12 months post-IPO often determine the trajectory of your company. With so much going on with managing the growth of your company, how do you find the time to create the required controls to become compliant?
Facts & Numbers:
Thirty-three percent of NYSE and NASDAQ IPOs have disclosed material weaknesses in their first-year post IPO. The reasons vary… 78% report lack of accounting resources and expertise, 63% inadequate control design or lack of control and 32% inadequate or lack of formal policies and procedures (source KPMG: 2020 IPO material weakness study).
To avoid this from happening to them, CEOs and CFOs must look for solutions to help them evolve from a small company relying on collective knowledge and small teams into a public company with new policies and formal company protocols. To achieve this, finance teams are faced with piles of new work alongside the need to continue to perform their everyday tasks. In addition, these teams face the challenge of adapting to ever changing regulatory governance and compliance regulations, as a new public company this adds to the workload. To adequately meet all the demands, companies take on costs. Surveys show that companies in their first year as a public company, allocate around 50% of their overall compliance budget just for completing the required audits and compliance reporting which takes on average about 6 months.
Why does it take 6 months to compile an audit report?
During these 6 months your auditor and a troop of subject matter experts will review your internal documents and request access to all accounting reconciliations (cash accounts, accounts receivable, journal entries, etc.). Why? The auditors are looking to gain reasonable assurance and confidence that the information presented on your financial statements is not materially misstated or contains risks such as SoD’s. Every line, every item, every event log should be reviewed. Clearly defined processes, internal controls and transparency are expected by shareholders and potential investors. Although the internal controls commonly known as SOX 404 are not usually required in the first year after an IPO, it is advisable to put processes into place sooner rather than later to increase the confidence in your financial information.
Does it have to take 6 months and 50% of the compliance costs?
The short answer is NO!
Everything in the world we live in is either digitized or automated. Why should financial compliance fall behind? Why do CFO’s, internal auditors and SOX teams need to manually gather the financial data accumulated in already digitized ERP systems? Why not join the rest of the world and ride the hyper-automation wave to ensure risk-free financial compliance quickly and continuously?
Imagine that you had a self-service software application that seamlessly connected to all of your financial systems of record, extracted all relevant data, and automatically analyzed it using a set of best practices controls matrices. Imagine the output is presented to financial teams using super friendly dashboards for them to quickly take action on the insights and alerts.
No need to imagine.
Datricks is an AI data-driven process analytics technology purpose-built for audit and compliance teams. The technology maps entire business processes automatically, uncovering risks and monitoring financial gaps in real-time. The powerful AI capabilities allow end users to surface insights and ask follow-up questions of the data, without the assistance of analytics teams, in a single environment presented in super friendly dashboards.
Think of a daily digest with all the alerts and insights in your inbox for you to act upon immediately and not months later.
No more periodic audit cycles – say yes to continuous monitoring and continuous compliance!