How to Prepare Your Life Sciences Company for a Successful IPO: Essential Financial Reporting and ERP Strategies

Getting ready for an IPO is a monumental step for any life sciences company. It’s the culmination of years of hard work, innovation, and perseverance. But before your life sciences company can ring the bell on Wall Street, there are some crucial preparations you need to make—especially when it comes to your financial reporting and ERP systems. Here’s how to ensure you’re ready to make the leap into the public market.

The Importance of Robust Financial Reporting

When preparing for an IPO, one of the biggest challenges life sciences companies faces is getting their financial house in order. You’ll need to demonstrate that your company has reliable, accurate, and comprehensive financial reporting. This isn’t just about looking good on paper—it’s about meeting the stringent requirements set by regulators and potential investors.

Most life sciences companies start small, often using QuickBooks or Excel spreadsheets to manage their finances. While these tools might be sufficient in the early stages, they quickly become inadequate as the company grows. As Partner-in-Charge of Sikich’s technology team, Mike Kean, noted, “Most life sciences firms don’t realize the problem with QuickBooks until a year or two in the industry. By that time, their systems aren’t robust and scalable enough, or they lack the financial reporting capabilities needed to keep up with a growing life science company’s need.”

To address this, you’ll need to upgrade to a more sophisticated financial system that can handle the complexities of a more extensive operation. This means moving to an ERP system that can automate and streamline your financial processes, giving you the accurate, real-time data you need to make informed decisions.

Why an ERP System is Essential

An ERP system is more than just a financial tool—it’s the backbone of your entire operation. It integrates all of your company’s processes, from procurement to inventory management to HR, into a single, cohesive platform. This integration is critical for companies preparing for an IPO, as it ensures that all parts of the business are aligned and working efficiently.

For life sciences companies, this is particularly important. The road to commercialization is fraught with challenges, and managing those challenges requires a system that can scale with your growth. Sikich’s SuiteSuccess for Life Sciences, built on NetSuite, is designed specifically for this purpose. “Within those 30 days, we give life sciences firms everything they need to get through the next two years,” says Kean. “They just need to turn on the features we have already included in our bundle.”

With an ERP system like this in place, you can easily manage the increased complexity that comes with scaling your operations, such as handling multiple legal entities, preparing for equity events, and ensuring compliance with Sarbanes-Oxley (SOX) controls.

Ensuring Compliance with Regulatory Requirements

One of the biggest hurdles in going public is meeting the regulatory requirements set by the SEC. This includes the Sarbanes-Oxley Act, which mandates strict controls over financial reporting. Specifically, Section 404(b) requires that a public company’s auditor attest to, and report on, management’s assessment of its internal controls over financial reporting.

For many life sciences companies, this is a daunting task. However, with the right ERP system in place, you can automate many of these processes, ensuring that you’re always in compliance. As Kean explains, “Even during the pre-revenue stage, life sciences firms will have to comply with these and other requirements that will lay the groundwork for transformation into a full-blown, profit-generating entity.”

Optimizing Finance Operations

Finally, it’s essential to optimize your finance operations to ensure they can handle the demands of a public company. This means streamlining processes, reducing manual workloads, and ensuring that your financial data is always up-to-date and accurate.

With a robust ERP system, you can automate many of your finance operations, from accounts payable to financial reporting. This not only reduces the risk of errors but also frees up your finance team to focus on more strategic tasks, such as analyzing data and making informed decisions about the company’s future.

The Bottom Line

Preparing for an IPO is a complex process that requires careful planning and execution. By investing in a robust ERP system and ensuring your financial reporting is up to par, you can set your life sciences company up for success as you make the transition to a public entity. With the right tools and strategies in place, you’ll be ready to navigate the challenges of going public and achieve your company’s long-term goals.

We are here to support you every step of the way and help you achieve a successful IPO. Don’t hesitate to contact us for any further assistance or guidance you may need in this process.