What are the core financial considerations before an IPO?

Financing and going public is undoubtedly a complex, time-consuming, and costly decision for many enterprises. Among them, “financial irregularities” have been repeatedly identified as the main obstacle to the failure of corporate IPOs. Statistical data shows that nearly half of the preparation work for corporate IPOs involves financial processing, while the vast majority of review issues in rejected cases revolve around financial issues. This not only explains why the approval rate of A-share IPOs has increased, but also why many companies choose to withdraw or be rejected due to various reasons. But why have many companies suffered setbacks in IPOs due to financial issues? What financial points should companies focus on before an IPO? Let’s delve deeper into it.

Why should a company’s IPO focus on finance?

In the process of corporate IPO, a common understanding is that IPO candidates often find it difficult to escape “financial challenges”. In fact, most of the rejected cases are related to financial standardization. Many companies preparing to go public have a certain degree of negligence in financial management, such as insufficient transparency in accounting treatment and incomplete compliance with the Enterprise Accounting Standards, which directly hinders their listing progress. Due to financial issues often becoming a decisive factor in IPO reviews, it is natural that they should receive high attention from companies.

In addition, regulatory agencies continue to maintain a high level of vigilance regarding the financial review of IPO companies. At first, financial management mainly played the role of a recorder, but as the enterprise grew, through data analysis, it gradually transformed into an important tool to assist the enterprise in reducing costs, controlling risks, and achieving value creation.

What financial factors are worth paying attention to before an IPO?

On the way to IPO, financial issues are an important factor affecting the process. So, what financial issues should companies focus on before making a decision to go public? Areas such as financial reporting and auditing, financial health, compliance, tax treatment, internal control and risk management, equity structure and financing strategies, related party transactions, and capital expenditure and investment plans are all areas that enterprises need to carefully plan and prepare for. For example, in the consideration of financial health, investors are particularly concerned about the asset structure, debt level, and solvency of a company; From a liquidity perspective, both cash flow and working capital can effectively reflect the short-term operational stability of a company. As for financial compliance, companies must ensure that their financial reports comply with relevant securities market requirements and international or domestic accounting standards.

The Role of Enterprise Digital Transformation in IPO

Financial issues are an important focus of IPO review, and many companies’ IPOs are facing financial difficulties. How can our digitization help companies avoid financial issues during IPOs? For example, many Fortune 500 companies are currently adopting the SAP ERP management system. SAP S/4HANA CIOud can build an integrated financial management platform for enterprises, more accurately reflecting their business, and achieving complete integration of business and finance from disclosure to accounting

Finance simulates, predicts, and plans digital business architecture from supporting daily work to supporting business growth and new business models; Perform business analysis anytime, anywhere, and engage in real-time finance that moves towards the future.

And achieve financial intelligence process automation through SAP S/4HANA CIoud, as well as enhance information assistance support for enterprise decision-making through centralized governance and visual output of data.

Experience has shown that digital transformation can not only increase valuation for listed companies, but also enhance market recognition and competitiveness, thereby better meeting the requirements of financial audit and accelerating the process of enterprise listing.

Conclusion, in-depth preparation to ensure successful listing

It is evident that ensuring financial authenticity and compliance is crucial for companies about to go public. Only by making sufficient preparations in these two aspects can a company pass the IPO review smoothly and avoid being rejected due to financial issues that may affect the listing process. To gain a deeper understanding of the financial authenticity, compliance, and other details in corporate IPOs, as well as how digital systems such as SAP S/4HANA CIOud can help companies meet the challenges of IPO review, please click on the link below to obtain richer information and expert advice.

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This article "What are the core financial considerations before an IPO?" by AcloudEAR. We focus on business applications such as cloud ERP.

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