Have your ﬁnancial statements audited and resolve potential disclosure and accounting issues
A company that wants to go public needs to have audited ﬁnancial information. It is easier and more cost efﬁcient to perform audits of ﬁnancial statements in the normal course of business, rather than shortly before going public. Further, the existence of audited ﬁnancial statements provides increased credibility to your company. Another consideration is whether you’ve grown the business through acquisitions. If so, separate audited ﬁnancial statements of businesses acquired
may be required at the time of the offering. Obtaining audited ﬁnancial statements of these companies after the fact can be a difﬁcult and costly task and could potentially delay your IPO timetable.
As your company gains ﬁnancial sophistication, it should also begin preparing quarterly ﬁnancial statements. More and more offering documents display the prior four, eight, or twelve quarters in order to reﬂect growth and trends.
Having them prepared timely can add to an investment banker’s evaluation of your company.
As noted in “Securities Regulations” (Appendix A) and “Current Regulatory and Disclosure Issues,” the company’s ﬁnancial statements included in your IPO registration statement will have to conform to positions and practices prescribed by the SEC staff which may be different than ﬁnancial statements previously prepared.
Draft management’s discussion and analysis (MD&A)
A stumbling block that many companies face is their inability to describe why the company’s performance was what it was. A registration statement and all future ﬁnancial statement ﬁlings with the SEC will require inclusion of Management’s Discussion and Analysis or MD&A related to those ﬁnancial statements. This is
a quantitative and qualitative discussion of your company’s performance. You will need to describe in depth such items as changes in sales volumes and cost
structures, liquidity and capital resources, sources and uses of cash ﬂows, vendor relationships, employee compensation, unusual nonrecurring charges, signiﬁcant environmental exposures, and other risks and uncertainties.
As you complete your year-end and quarterly ﬁnancial statements, you should take time to write your MD&A. It is very difﬁcult to remember why insurance costs went up or when a marketing campaign commenced three years after the fact. The practice of writing quality, comprehensive MD&As will expedite your registration process and will be a major step toward operating like a