When businesses are just starting out, administrative tasks like keeping track of who owns what share of the company are often quite simple. But as they grow, all of this admin work does too. Eventually, it becomes impossible for the founders to manage it all by themselves.
When it comes to managing equity, successive rounds of fundraising, employee stock ownership plans, and acquisitions made using company stock all muddy the waters. However, modern software solutions can easily keep on top of this. Here’s how they benefit businesses.
Real-time data access
Modern equity management software can instantly provide information about all of a company’s owners and what share of the company they own, even when the ownership structure has been made very complicated by the use of options, grants, and different share classes. Having up-to-date information about this is essential when companies are making decisions such as raising more money using equity.
Cost-effectiveness
For a company with a complicated ownership structure, it would take a human hours or even days to gather the kind of information that software can provide in an instant. The software therefore saves time and money that would have been paid in wages. It also lowers the risk of costly compliance and legal issues.
Automation
There’s less chance of software producing computational errors or typos than there is with people, and so equity management software can be trusted to automate the administration of things like employee equity plans and compliance reports.
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Integrated tax and accounting
Most modern software for this purpose is able to work seamlessly alongside digital solutions for other aspects of business, such as taxes and accounting. When equity is granted as compensation through stock options or employee equity plans, this has important tax implications for the business and the individuals receiving the equity.
Ease of use
This will vary slightly depending on what software is being used and who developed it, but most have a user interface designed around a dashboard where important information can be found quickly and easily when it’s needed. Most can also generate legal agreements and reports in just a few clicks.
Conclusion
For companies that are large or growing fast, equity management becomes a very complicated matter. But management software allows you to access the information you need instantly, whenever you need it, and it can streamline and automate many of the processes involved with equity management, such as managing vesting schedules and topping up employee share plans.
