October 23, 2018

10 Tips on How Controllers Can Survive Their First IPO

Controllers First IPO

So far, 2018 has been a damn good year for IPOs in the United States.

The U.S. IPO market is coming off a first quarter in which 44 companies, including Dropbox, went public, raising about $15.6 billion—the best quarter by proceeds in three years, according to a March analysis by research firm Renaissance Capital. That $15.6 billion far exceeded the $10.9 billion raised over Q4 of 2017. In addition, there were four billion-dollar IPOs in Q1, more than all of 2017.

Members of accounting and finance departments discuss various angles of the IPO process. Read more.

That momentum is expected to carry over to Q2 and possibly all of 2018, according to Renaissance Capital:

[iQIYI] and Dropbox, together with Spotify’s pending April listing [Spotify Technology went public on April 3 but opted for a direct listing], may represent an emerging trend of large private tech companies making their long-anticipated debuts. If this trend continues, it should lead to another multi-year high in the second quarter. […]

With 44 IPOs year-to-date, this implies roughly 70-75 IPOs in the 2Q18, which would be a four-year high. […] A number of billion-dollar IPOs are also lined up, including spin-offs from AXA and DirecTV. Before those hit, there has been much ado about Spotify’s non-IPO on April 3rd, but regardless of its outcome, 2018 is on track to be the U.S. IPO market’s second-largest year since the dot-com bubble.

If you’re a corporate controller at a private company that is starting to put the wheels in motion on going public in the next year or two, this might be your first experience involved in an IPO process. Get ready to put in lots of long hours and expect many highs and lows along the way.

A roller-coaster ride

“It’s certainly fair to say that it was a roller-coaster ride—sometimes hour by hour—and it took a lot of work and dedication from a lot of different people,” said Scott Paterniani, CPA, vice president and corporate controller at Wheels Up, a membership-based private aviation company based in New York City, who was corporate controller at Borderfree Inc. in New York when it went public in March 2014.

Having assisted several clients through the IPO process while working at Grant Thornton helped Paterniani during his first IPO as a corporate controller. Hired by Borderfree in February 2013, Paterniani played a key role throughout the e-commerce technology company’s IPO journey.

“[That previous IPO experience] with former clients allowed me to go into Borderfree confident in knowing what to expect: the financial reporting and internal control requirements; the challenges of SEC reporting; scaling an accounting and financial reporting team to meet the requirements of an SEC filer; the ups and downs of the IPO process; the cadence of the deal; managing different personalities, both internally and externally; and providing guidance and support to other finance functions and other departments throughout the project,” Paterniani said.

“Additionally, having an intimate understanding of the processes and procedures from the public accounting side of an IPO really added value to the project, in my opinion,” he added. “I was able to anticipate questions, concerns, and procedures from our audit firm, which certainly helped our preparedness throughout.”

While you will never work on another project that will have such a wide range of ups and downs, Paterniani said, you’ll feel “a tremendous amount of pride and accomplishment when the company goes public.”

Advice for first-time IPO controllers

Paterniani and three other controllers who have been through the IPO wars offered the following 10 tips for their fellow controllers to consider as they embark on their first IPO experience:

1. Research the IPO process. “If you have not gone through an IPO, brush up on what is involved, who the players are, and what pitfalls have trapped others,” said Britt Jeffcoat, CPA, a former public company chief accounting officer and current financial consultant, who was senior assistant controller at JP Energy Partners in Irving, Texas when it went public in October 2014. “You will not be able to anticipate every challenge that arises, but being prepared for the more common issues will improve your ability to take on the unanticipated problems.”

2. Go through an IPO readiness assessment. “IPO processes can be a grueling experience due to multiple demands on your time. Management, external auditors, and internal auditors all want something from you. I cannot stress enough the importance of IPO readiness efforts,” Jeffcoat said. “The demands on your time can be more readily addressed once the organization’s fundamental processes are aligned to its end game. If you can routinize your financial reporting, your SOX internal controls, your monthly close process, etc., with a mind to behaving like a public company, you will have already fought much of the battle.”

3. Make sure your financial house is in order. “The controller should be getting ready [for the IPO] at least two years in advance because the condition of the financial data is going to be the key to getting minimal questions back from the SEC,” said Robert Day, CPA, CMA, CGMA, corporate controller at KeyW Corp., a Hanover, Md.-based provider of national security solutions that went public in October 2010. “The controller should clean up any purchase accounting issues and confirm that all acquisition data has been integrated into their accounting system appropriately.”

He also recommended making sure your financial reporting systems can replicate statements or schedules that were included in the SEC Form S-1 so that you can provide comparable data as you move forward, at least for the first year.

“Because you do not have a track record yet, the only thing investors have to compare you against is what you told them in the S-1,” Day added.

4. Read and study S-1 filings of other companies in your industry. “Look at the SEC comments on those filings so you have a good understanding of what the SEC is looking for and so you have an idea of how previous years’ financial data needs to be presented,” said Day, who was vice president and controller at SI International in McLean, Va. when it went public in November 2002. “In the situation where the accounting system would not support what you need, it gives you time to go back and modify your data or your reports so when the time comes, you are prepared to respond quickly.”

5. Scale and strengthen your accounting and financial reporting function. “When adding talent to the team, if you think you need someone with four or five years of experience for a role, find someone who has seven or eight years of experience,” Paterniani said. “If you are going to miss on a hire, always miss by hiring someone with too much experience.”

6. Utilize everyone on your team. “While a controller is going to be playing a key role in most every aspect of the IPO, it is your responsibility to make certain that each member of your team feels as though they own a part of the process,” Paterniani said. “This could be the only time in the careers of most of your team that they will participate in an IPO. Keep everyone involved, keep everyone dialed-in, and at the end of the project, your team will have a renewed sense of togetherness and they will be ready to move forward as a high-functioning public company accounting and financial reporting team.”

“Additionally, your goal as controller should be to prepare every one of your team members to take on more responsibility and move up the ranks at your company, or prepare them to take on larger roles outside of the company when they are ready to move on,” he added.

7. Get along with your team. “You will be spending hours, days, weeks, and months together. Be kind and respectful. Realize that everyone has a breaking point—don’t push them to theirs,” said Cary Morgan, corporate controller at Utah Tank & Trailer, a West Valley, Utah-based company that specializes in tanks and equipment, who was vice president corporate controller at Chordiant Software Inc. in Cupertino, Calif. when it went public in February 2000.

8. Be open, honest, and get things right. “No one wants a class-action lawsuit,” Morgan said. “Don’t be afraid to ask questions, be able to support your position with facts, be humble enough to admit you are wrong if you are, and give praise when it is merited.”

9. Don’t sweat the small stuff. “Having worked on half a dozen IPOs over the years, no IPO is executed perfectly or to plan—but that is the beauty of it all,” Paterniani said. “As issues and challenges arise, take a step back, figure out how to address the issue, make the appropriate corrections, quickly figure out how to avoid similar issues in the future, communicate that to the team, and move on. There are always more important things to get done.”

10. Maintain some balance. “Don’t forget your personal life,” Jeffcoat said. “The proverbial work/life balance will likely need to be out of alignment during the IPO, but you shouldn’t completely sacrifice the personal components of your life that make you who you are.”

In a future article, we’ll learn how these four corporate controllers supported their CFOs during the IPO process.

How automating the month-end close process can help companies planning for an IPO meet their SOX compliance needs. Read more. You can read more about Going Concern’s partnership with FloQast here.

Image: iStock/hanibaram

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Non-Profits Are Feeling the Pain

WSJ has a Monday piece “Once-Robust Charity Sector Hit With Mergers, Closings” (the Recession Forces Nonprofits to Consolidate) that may be found here. It tells the story of a “homeless” woman with terminal lung cancer and a charity no longer able to afford to help her out. Sad.

When one charity’s COO says “we’ve had funding cut after funding cut, and we never know when the next shoe is going to drop,” that is a bad sign.

Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings.

“Like in the animal kingdom, at some point, the weaker organizations will not be able to survive,” says Diana Aviv, chief executive of Independent Sector, a coalition of 600 nonprofits.

I saw that on the Discovery Channel and it wasn’t pretty.

Note: the Service says the value of your blood is not deductible as a charitable donation but cars are. As of 2005, cars are only deductible at FMV, not Blue Book. Damn you, fair value, foiled by the free market again!

Blame the Service for tightening its charitable donation rules at the worst possible time? Not sure on that one. While you’re reluctant to donate your $200 Toyota (ha) to charity because you could have claimed $2,000 under old rules, find some comfort in the fact that (alleged) terrorist “non profits” can not file for 2 years and somehow get away with it. You wonder why I advocate fixing the system from the ground up?

You can text $10 to Haiti but what about the “Economic Homeless” here in America? asks Young Money.

If this were a survey and you asked me “What do you think the IRS could do to encourage charitable donations?” I would answer “Tax breaks. It isn’t the Treasury’s job to distribute bailouts.” Yet they continue to behave as though it is their duty.

See the problem yet?

Hallelujah! Church Accounting Miracles!

I had no idea how much a minister can make but now I do. Wait a minute, this just tells me how to bypass Service rules by writing checks in the church’s name. I might totally be in the wrong line of work.

Free Church Accounting (I’m not kidding) brings us a question from “Sharon” of Corsicana, Texas:

How much money does a minister have to make in order for money to be reported?

I started my church back up after 12 years vacancy. I do not have very many members. Right now we are 3 active members and other people stop in from time to time. I do not actually receive money. Since the church is striving I use the money to pay the light bill, get the grass moved.


According to the IRS website, “Earnings of $400 or more are subject to self-employment taxes.” (that includes qualifying ministers)

If you are a church employee, income of $108.28 or more is subject to SE tax.

It would be better for you, if you opened a checking account in the church’s name and paid expenses out of it. If that’s not possible, just make sure and keep all of the receipts that show where the church funds are going.

Fascinating! I took the preliminary “Are You a Tax-Exempt Church” quiz on their website and failed miserably so I guess I’d make an awful 501(c)(3) but that’s probably for the best.

There are ways to fail at this of course, like the Spokane, WA priest who couldn’t keep his arms and legs (and other parts) inside of the vehicle at all times, financial mismanagement in the University of North Carolina system, and JDA favorite the University of Colorado’s wild credit card user with horrible hair.

I would never imply that more regulation is the answer; I’m merely pointing out that there’s a bit of work to be done in identifying non-profit fraud. Seriously, how can one detect fraud when the core basis of fund accounting is an imbalance between “expenses” and expenditures?

The Church of Jr Deputy Accountant Scientist? I’m down.