Many companies use Excel or another spreadsheet to record and track stock options and activity. While spreadsheets are affordable and powerful in many ways, they do pose some drawbacks. Primarily, your employees are going to spend a lot of time maintaining the cap table and may find that inaccurate information gets presented to employees, investors, and board members. These mistakes could negatively impact your financing, cost you thousands of dollars for legal fees, and require you to reconstruct your table.
Cap table software, sometimes called equity management software, can help you immensely. For one, you reduce the risks of recording transactions incorrectly and also reduce your need for spreadsheet maintenance. Along with such, many software products also offer services that can calculate everything for you, such as the fair value of your share-based compensation.
Are You Ready?
Before you can choose a cap table software that meets your needs, you must first decide if your company is ready to switch from spreadsheets to software. To do that, you can ask yourself three questions:
- Are you hiring more people now than in the past?
- Do you incorporate stock options in the hiring package more frequently?
- Are you currently looking for financing?
These three questions can help you determine if you’re ready for software. If you hire more people now, you may have more stocks to send out and may need to track more stock options, as well. Those who hire new recruits and give them stock options should also consider software. Stock options are an attractive way to retain talent. When expanding the employee base and issuing stocks as a way to motivate them, you may find that your cap table is greater and should be monitored more closely. Along with such, financing creates more stocks to record or monitor, as well. Visit Colonial Stock Transfer Company, Inc. for more information.
