With Twitter's blockbuster 2013 IPO and Facebook's less successful 2012 floatation still very much at the back of the tech industry's collective mind, it's high time for companies to start accepting the inescapable fact that - from pinpointing revenue leakage to filling out compliance requirements - the process of launching an initial public offering is not for the faint of heart.
The challenging road to the IPO
When companies go public, they expose themselves to unprecedented levels of scrutiny. If authorities find abnormalities in reporting, compliance, and/or legal structuring, delays and stiff fines can result. For example, Morgan Stanley, the lead underwriter for Facebook's 2012 IPO, was ordered to pay $5 million (£3m) in fines to the US state of Massachusetts for advising the company to reveal revenue forecasts to select clients before actually floating, which prompted numerous Wall Street analysts to reduce their predictions about Facebook's growth just as the company went public.
Also last year, a Wells Fargo senior client associate was fined $5,000 and suspended for changing dates and account numbers on various customers' IPO forms to make them appear more current.
The consequences don't end with fines, however. Companies can miss the precious market timing advantage that can make or break an IPO. Investors are more comfortable putting their money into stocks, and thus IPOs, when markets are rising. If a market is falling, investors balk; this is one explanation for why Facebook's stock initially fell after its IPO.
Twitter timed its market entry more successfully, but imagine what would happen if the Twitter IPO was delayed by a compliance issue, and meanwhile the market fell? It would have been a game-changer, and not in a good way.
HR and the cloud
Human resources management is one of the biggest and most scattered components in any IPO. Timesheets, payroll, resource allocation, billable revenue - the list of moving parts goes on, and all apply to a company's reporting and, ultimately, valuation. No wonder nearly 60 per cent of companies are planning to implement new, cloud-based HR systems.
The cloud enables businesses to easily centralise and streamline many disparate parts, and in an IPO, that is essential. Placing functions such as payroll, recruiting, and training in the cloud enables companies to collect and review data in a single, coherent system. This data transparency, in turn, reduces the risk of missing information that may be non-compliant. In addition, enterprises have greater insight into their costs and drivers of business performance. They are empowered to discover, control, and manage not only costs, but time, which is a crucial enterprise asset.
Making the cloud work pre-IPO
To prepare, a company should put systems into place that make it simple to evaluate compliance and respond to market realities in a transparent manner. Businesses must also gather and organise audited financial statements using IPO-accepted protocols, and ensure that the corporate governance is accountable and consistent.
Historically, there have been plenty of IPO filings that have not leveraged HR technology, but that was before employees were able to interact with HR, anytime and anywhere, via mobile time-tracking apps, project management software and the like. Savvy entrepreneurs would do well to embrace the new world of HR right away so that when the time comes to file, they're already equipped.
Placing HR in the cloud is an important step in pre-IPO planning. Companies can use the right cloud-based software to empower workers to enter time against projects, tasks, or clients, request PTO, and access approvals workflows via the mobile device of their choice. This enables companies to track employee time from any iOS or Android device, thus ensuring accuracy in expenditure, even for a distributed, global workforce.
Other benefits include ensuring greater accuracy in employee reporting and budgeting, as well as increased expenditure transparency. This decreases the risk of revenue leakage. In addition, effective HR solutions will allow supervisors to monitor time, resources, and project data in real-time, catching problems before they grow, as well as streamlining the process of reviewing, approving, and processing timesheets, thus saving hours of productivity.
In short, the right cloud-based technology can empower a company to maximise the potential of its most valuable resources - people and time. By streamlining disparate human resource modules on cloud systems, a company can establish the accountability, transparency, and efficiency that ensure IPO success.
Raj Narayanaswamy is the co-founder and co-CEO of Replicon, a specialist in cloud time tracking applications.