Whether implementing an accounting system like Xero for the first time, or migrating to or from other software, you'll need to follow the correct steps.
- Plan, plan, plan
- Choosing the software
- Static data
- Opening balances
Plan, plan, plan
Planning is essential for migrating to new accounting software. It's a bit cliche, but it goes a long way. Implmenting accounting software is a relatively straight forward process and many pieces of software have built in guides to follow. This guide should help you with the broad outline common to many different software setups.
Choosing the software
You need to choose the right software for your business. I will cover some aspects of choosing different software in another post. For now, common considerations are:
- Cloud vs on-premises
- Size of your organisation
- Maturity of finance function
- Your existing processes
Moving accounting systems can be quite onerous depending on your existing processes, so it is important to consider how long you might use the software for.
Choosing the timing is really part of the planning phase. There are particular break points that lend themselves to migrating accounting system. Those times are:
- Year End (Best)
- VAT Quarter End
- Month End
- Mid-month (Worse, don't do this)
THe main difference between the different timings are the opening balances.
Year ends are a good time migrate because it is a clear cut-off from old system to new system. If you are a smaller company, it also gives solid opening balances as these can be confirmed by your accountant. Whilst a year end is the best time to make the switch, however, your business may want to have the accounting system in sooner, so aligning with the VAT quarter might be more suitable.
When migrating at a VAT quarter end, you would perform a VAT return in your old software. Any open invoices in last VAT return would be bought over with an "out of scope" tax code. This will mean that it is not included on any future VAT returns.
No one likes to feel that they don't know what they are doing. Moving to new software can often leave staff behind. Training is one of the most important tasks, without adequate training it doesn't really matter how good the system or data are, you won't be able to use the software's full potential.
Static data can be prepared well in advance. Examples of static data are: customer and supplier records, nominal codes, stock items, and employees. All of these can be arranged into the correct format ready for import or entry. Any changes after the initial preparation can then be easily updated.
I would recommend preparing spreadsheets of static data to import into your new software. This might be easier if you are migrating from one accounting package to another. A spreadsheet gives you the opportunity to check over the data and make changes as required before importing into the new software.
The last data to prepare are the opening balances. This gives you the starting point for your new system. The opening balances are your trial balance at the end of the last day in your old accounting system. Your accountant should be able to help you with these figures. Migrating from one system to another is easier as you should be able to export a trial balance from the old system, it would then be acase of entering the data manually or importing the data. You will also need to enter all opening invoices into the new system. Usually, the balances of debtors and creditor ledgers would get posted to the suspense nominal, with the open invoiecs posted there too, so that the values cancel out.
A note on comparatives - In most cases, some comparative data are brought over. Xero normally takes they final trial balance for the last two years, so that there is something to compare against. Depending on date of your opening balances, you might bring over monthly trial balances for the current financial year. I recently migrated a client from Sage50 to Oracle's Netsuite. We bought over 7 years worth of monthly trial balances, covering several legal entities. This was very ambitious, but provided some very good comparative data. More here