Many companies are in the startup phase or the pre/post-IPO stage, and they tend to use Excel or another spreadsheet-based management tool to record and track their stock options and activity. While Excel is affordable and powerful, it’s not the best option for recording/tracking stocks. For example, clients can easily get frustrated by all the time they spend maintaining their cap table. Sometimes, inaccurate information gets presented to owners, investors, the board of director members, and employees. This type of mistake can adversely impact your financing or result in a mispriced option grant. Instead, it might be best to use cap table software that’s designed for this need.
Thankfully, there is another choice available. You can use equity management software that’s purchased from an experienced vendor to reduce your risk of recording improper transactions and lower the risk of a resulting headache from having to deal with spreadsheet maintenance. You can find a variety of software products that can handle all the complex calculations you need, including the fair value of any share-based compensation, which is based on a variety of assumptions, including discount rates, volatility, or equity value. Some providers might also offer stock compensation schedules that can automatically post and calculate your necessary compensation costs directly to the general ledger.
Are You Ready?
Before you can determine which cap table software you need, it’s important to make sure that your business is ready to switch from Excel spreadsheets. If you’re hiring more people now than in the past, you may have more option grants and more unique vesting terms, which must be tracked accurately. Along with such, you may find that you incorporate the stock option scenario as part of your hiring package more frequently. In this case, the data must be monitored and accumulated appropriately to help you retain your talent. Visit Colonial Stock Transfer Company, Inc. for more information.