How to Choose an Equity Compensation Financial Reporting Solution

As a top-rated financial reporting service provider, we talk to a lot of companies about their equity compensation reporting. One question that often comes up is how to select the right solution. Our response? Make sure the following considerations are part of your vendor evaluation process.

1. Know product demos are limited.

Of course the demo is going to look nice and flow well. The person delivering it has probably rehearsed it hundreds (if not thousands) of times. Still, take a demo for what it is: a carefully guided tour. Don’t expect perfect insight into the experience you’ll have (with your equity program and reporting requirements) if you choose to move forward.

2. Review sample work product.

Ask vendors to show how they would meet your top five requirements. Insist on tightly applicable sample reports or live reports with a subset of your data that you can personally audit. A thorough report walk-through, potentially onsite, is the surest way to know whether a vendor can really deliver. Rather than “trust, but verify,” make it even simpler: verify.

3. Share a vision of your future.

Don’t focus on today’s priorities only. Plan designs and internal reporting requirements evolve, so build a five-year vision for financial reporting. For example, direct tracing expense to cost centers is emerging as a big trend. Take this potential future to providers and ask for work product that illustrates their ability to grow and flex in tandem with your evolving needs.

4. Stress-test vendor capabilities.

Finance functions are pivoting to business impact. This means stronger management reporting and collaboration across tax, external reporting, FP&A, treasury, and executive compensation. With regulators and auditors focusing more than ever on the audit of internal control over financial reporting (ICFR), you’ll want to meet these needs through automation and not manual workarounds. Stress-test vendor capabilities to make sure they can serve strategic and emerging needs over the long run.

5. Meet the delivery team.

Who will serve you after you put ink on a contract? How close to the action will your service team be? Clearly, it doesn’t need to be everyone since there are different specializations within an organization. But early in the vendor selection process, you should get to know the people charged with driving your implementation to its ultimate and successful conclusion.

6. Understand the full costs of a “70% solution.”

Most out-of-the-box solutions should get you 50% to 70% where you need to be, but hitting 100% is less likely when customization is minimal. If a solution does a pretty good job for 70% of what you need, decide how comfortable you are with closing the gap manually. A lean department may have low tolerance for manual workarounds.

7. Watch out for shadow costs.

“Shadow costs” occur when one constituency (e.g., external reporting) is engaged in the vendor selection process but related constituencies (e.g., tax or treasury) are not. The result is an incomplete solution that leaves certain control risks unchecked. Do your best to shine a light on all stakeholder needs and send shadow costs scurrying.

8. Scope out the service ethos.

Chances are, you’ll have heavy demands on your solution provider, such as a major plan design change or an urgent need from the CFO. Try to gauge whether the people who will serve you like what they do and are committed to driving results even amidst tough odds. If they’re just going through the motions, your outcome won’t be as good. You need people who are eager to solve your problems.


These tips for selecting an equity compensation financial reporting solution have several common themes. First: People matter. Vendors are an extension of your team. And when it’s 8:00 pm, emails are flying, and you’re scrambling to deliver good information, you want quality and commitment at your side.

Evidence matters too. This is a solution you need to live with—one that’s costing you political and financial capital. Less talking and more evidence in the sales process is what you need to push for.

Finally, impact matters. If finance departments are fighting for impact, then quality of staff, technology, processes, and vendors are necessary ingredients. Make decisions not just on today’s basics, but also on who can grow with you and deliver insight, efficiency, and effectiveness over many years to come.