We’re all familiar with the Seven Deadly Sins, even if our only exposure to them is the Brad Pitt film, Se7en. But what about when it comes to delivering a capitalization table? We count seven definite pinch points that might leave you feeling a little guilty. But not to worry. After all, to err is human, and guidance is at hand.
Cap table sin #1: Failure to centralize data
It’s risky to track your equity data in more than one location, different spreadsheets, or by two different groups. This makes it impossible to ensure you have consistent data, such as an option exercise for 100 shares and a corresponding new stock certificate for 100 shares.
Cap table sin #2: Not connecting to the live data
Creating a capitalization table that is not integrated with your live data can spell big trouble. This means you have spreadsheets not connected to the actual equity records.
Cap table sin #3: Manual calculations
Failing to automate formulas and calculations is another opportunity to introduce errors and inconsistencies. A calculation can be right in one column or row, but not in another. Or, the cell reference in one place could be copied and adjusted by your spreadsheet incorrectly.
Cap table sin #4: No flexibility in reporting
A lack of flexibility in your spreadsheets means time will be wasted whenever you need to look at the data in a different way. Imagine if you need to see it by stockholder name, then by stockholder group. By number issued and then fully-diluted. As of today’s date and then as of Dec. 31st last year compared to the year before.
Cap table sin #5: Reports that are not integrated
Using static reports is inefficient and a waste of time. Like your cap tables, your stockholder and stock option reports, period-to-period changes, employee status reports, and period-end disclosure reports should all be connected dynamically to your live data.
Cap table sin #6: No document support
If you have accurate data, but are unable to support the data with the historical legal documents, you can’t have confidence in the information. When you’re unsure, you may rely on guesswork rather than taking the time to find the original charter amendment that was filed, the minutes of the board meeting, or the transfer notice. Documents that support the information should be organized and linked directly to the data records.
Cap table sin #7: Sharing by email
Sharing cap table spreadsheets by email is a recipe for disaster. You end up with multiple copies of the cap table stored by different people, different files are updated at different times, and you no longer know which is the most up-to-date version. And let’s not even get into the security issues. Fortunately, there is a solution to all these issues – and it’s easier than you might think. The answer is to centralize your data in an automated, cloud-based equity management solution that already includes cap tables, reports, equity accounting, and external user access, all dynamically linked to the live data. Why not just worry about entering accurate data – and let the system take care of the rest? After all, it’s not sinful to make it easy on yourself.
About the AuthorMore Content by Hannah Bloomfield