Is Your Company Really Ready to Implement Cap Table Software?
You may be asking yourself why use Cap Table software instead of an excel spreadsheet like you have been doing. Sometimes it is difficult to change our normal routines but employing a cap table management is worth the trouble, and sometimes change is as good as rest. Many companies use excel to manage equity and stock option activities because it is affordable but it has many disadvantages. It is frustrating to use excel spreadsheet to maintain a clear, and accurate cap table all year long. It only accelerates inaccuracy and misinterpretation of information. It might be a considerable issue when the inaccurate information is presented to investors, employees, owners or the board of directors. Such mistakes will greatly interfere with your chances of getting finances especially from investors. It can cost you a lot of money in form of legal fees as you correct the errors in the cap table.
You can however avoid all this inconveniences by using an equity management software, which reduces the risk or probability of recording transactions inaccurately. It is also easy to maintain compared to the strenuous work you have to do to maintain a spreadsheet. Cap table management software products are easy to use and very convenient because apart from that it does complex calculations for you. These calculations may include the fair value of the share-based compensation based on assumptions like equity value and discount rates among others.
Many cap management software providers offer stock compensation recognition schedules that calculate and post compensation costs to your ledger automatically. If you feel like your company needs new management strategies and tools it might be time for you to embrace cap table management. It is more reliable compared to excel spreadsheets.
How Do You Know Your Company Is Ready To Use Cap Table Software?
There are several changes that a company experience as it grows. These changes can be clear indicators that your company is ready to embrace cap table management. The following questions will help you to make the final decision about whether it is time for your company to move away from Excel and to start using Cap Table Software:
– Is Your Company Hiring More People Now Than Before?
If you discover that, your company is hiring more individuals you will also note that you have an increasing number of option grants and new vesting terms different form the old ones. You will even detect that there is an rise in the levels of option exercises that need accurate tracking.
– Is Your Company Incorporating Stock Options And Is The Exercise Part Of Your Hiring Package, And Is It Regular?
Hiring and retaining good talent brings many good to the company and issuing stock options greatly helps with this. In the event that you decide to issue shares in order to increase your employee base, it means you will have more cap table data. More cap table data means there should be increased monitoring of the same data.
– Is Your Company In The Process Of Seeking Financing?
Your company may be in need of finances for development or any other operations. There are different types of financing for example Series A round or beyond. Such kinds of finance needs also need to be recorded and they can complicate the equity structure and cap table if not accurately monitored.
What You Should Look For In A Cap Table Software Provider
The above questions will assist you to determine whether you are in need of a cap table software or not. If you need one you need to decide, which software caters for all your business needs appropriately? Cap table software providers offer several software you can choose from that range from generic to advanced options for startup companies and for publicly traded companies respectively. There is a software out there that is suitable for your kind of company and its current needs. Consider the following insightful points when looking for a software that will serve your company well,
- The number of equity securities series that your company has
- Are you better off using an external specialist to complete evaluations or will a software work better for you?
- Are you ok with the software becoming part of the internal accounting and human resource system of your company as an integrated tool
- The people who will access the software in the company for example investors, external editors, accounting team and legal counsel
- Is the provider capable of moving the current cap table data from your existing spreadsheets to the software?
If your needs are very any you will be comfortable with a cap table provider who can provide you with several different logins and different rights capabilities so that you are able to view credentials for your users.
How Should You Select Your Cap Table Software Provider
There are several selections in the market and you can find providers that offer demos so that you experience how their service works before you purchase. It is important that you choose a software that will improve and ease your equity monitoring. The price also determines which software you will chose because you cannot go for one that is beyond your budget.