After the IPO, platform-based technology companies must continue the fast-growth mindset that got them to market in the first place. That requires continued alignment and close collaboration between the business and engineering. There are five critical ways that this alignment can fall short, especially within the first year or two post-IPO.
1. Insufficient system architecture
It’s vital to have up-to-date enterprise resource planning (ERP) systems and an adequate revenue subledger architecture that can scale with the transactional volume and overall growth of a company post-IPO. Other gaps to look out for include insufficient reporting capabilities and a lack of appropriate systems documentation. Companies must also make sure they have systems that can support production of consistent, reliable KPI data and nonfinancial metrics.
2. Lack of “one source of truth” and effective data management
Data must be complete, accurate and useful to stakeholders. But when data is siloed and/or dispersed across services, that can be a hard target to hit, posing a significant business risk.
Data managers shouldn’t rely solely on SQL queries; they must be able to generate reports that can be understood by less-technical finance personnel. Change management also plays an important role. Managers must make sure that queries are updated when underlying tables are modified.
Because a public company reports quarterly, financial reporting is more crucial and must be more tightly governed than when the company was private. IT must understand financial accounting, reporting, disclosures and controls. If not, master data might be of no use to stakeholders. Additionally, inconsistent master data in different systems can cause data manipulation to occur outside of reporting systems, creating inefficiencies and risks around compliance and data integrity.
When considering master data management, several elements must be in order:
- Data tag and field definitions must be consistent across the organization
- Group-specific trial balances must tie to accounting trial balances
- Governance models must meet stakeholder needs
- Data dictionaries must be kept up to date as the business grows and changes
- IT systems of record for data elements must be defined
- Processes and controls must be in place to make sure data remains aligned between IT systems
3. Lack of understanding of the “golden path” for revenue from initiation to subledger
The “golden path” is the scenario in which revenue flows seamlessly from initiation to recording without any exceptions. Due to the decentralized nature of revenue-related services, achieving this is often an extremely time-intensive discovery exercise.
The constantly evolving SOX environment also plays a role here. Too often, teams that “own” SOX do not communicate well with product and engineering teams. The disconnect means that both SOX leaders and product and engineering teams do not fully understand the financial risks associated with a company’s core product. And as microservices are created and functionality is compartmentalized, the number of applications in-scope for SOX can expand significantly.