Accounting Migration
Migrating your accounting books to a new system like XoroERP is a critical task. When done correctly, it ensures smooth operations and prevents future complications. This guide will walk you through the essential steps and considerations for a successful migration.
Timing of Migration
The timing of your migration significantly affects the account balances you need to transfer:
End of Fiscal Year Migration:
Transfer only the balance sheet account balances.
Within Fiscal Year Migration:
Transfer both balance sheet and profit and loss account balances. Profit and loss accounts reset to zero at the fiscal year-end, so they are not needed for end-of-year migrations.
Additionally, you need to transfer non-posting GL transactions related to open sales orders, purchase orders, work orders, or manufacturing orders.
Required Reports for Migration
To begin the migration, gather the following reports from your existing system as of the migration date. For example, if your migration date is May 1, 2020, and your fiscal year starts on January 1, 2020:
Trial Balance
Income Statement
Balance Sheet
AR Aging Detail
AP Aging Detail
Inventory Valuation Detail
For open orders, you will need:
Open Sales Order Detail Report
Open Purchase Order Detail Report
Open Manufacturing Order Detail Report
Steps to Migrate Books to XoroERP
As mentioned earlier, the primary goal of migrating your books is to transfer the opening balances for all accounts accurately. By the end of this process, the trial balance in XoroERP should match exactly with the trial balance from your previous system as of the migration date.
Let's explore the process of migrating different types of accounts into XoroERP. We'll categorize the trial balance accounts into eight groups:
Bank
Inventory
Accounts Receivable
Accounts Payable
Customer Deposits or Unearned Revenue
Prepayments or Prepaid Expenses
Sales Taxes
All Other Accounts
Selecting a Suspense Account
Before migrating account balances, select a suspense account to use during the process. Typically, this account is "Opening Balance Equity." At the end of the migration, the total balance in this account in XoroERP should match the retained earnings balance from your previous system as of the migration date.
Bank Accounts:
Here are examples of journal entries for the ending statement balance, outstanding checks, and outstanding deposits. The key point is to ensure that the register balance in Xoro matches the register balance in your previous system. A common mistake is creating a single journal entry to transfer the register balance without accounting for the ending bank statement balance, outstanding deposits, and outstanding checks.
Example:
Ending Statement Balance: $50,000
Outstanding Checks: $6,000
Outstanding Deposits: $5,000
Register Balance Calculation:
Journal Entries:
Bank Statement Balance:
Debit: Bank Account | $50,000
Credit: Opening Balance Equity | $50,000
Outstanding Checks:
Credit: Bank Account | $6,000
Debit: Opening Balance Equity | $6,000
Outstanding Deposits:
Debit: Bank Account | $5,000
Credit: Opening Balance Equity | $5,000
Repeat this process for all of your bank accounts until all balances are accurately transferred.
Final Check: Ensure that the bank balance in Xoro matches exactly with the bank balance in your previous system as of the migration date.
Inventory:
After completing the inventory upload, ensure that the inventory balance in Xoro matches exactly with the inventory balance in your previous system as of the migration date.
Important: The inventory should be transferred at the average cost, not the standard cost, in Xoro. Therefore, along with the quantity numbers, update the average cost or unit cost in the Xoro template.
If the average cost value is not provided in the template, the system will default to using the standard cost of the item. This can affect the total asset value of the inventory on the balance sheet.
Accounts Receivable (AR):
To upload the accounts receivable balances, obtain the AR aging detail report from your previous system as of the migration date.
Convert the data into the Xoro Upload Invoices and Upload Credit Memos templates, and then perform the uploads.
Ensure that the uploads preserve the aging of the invoices. During the process, the system will pick one single item per invoice, usually referred to as a miscellaneous item. The income or expense account associated with this item should be "Opening Balance Equity" or the same suspense account used for migrating the books.
After completing the upload, verify that the AR balance in Xoro matches exactly with the AR balance in your previous system as of the migration date.
Accounts Payable (AP):
To upload the accounts payable balances, you will need the AP aging detail report from your previous system as of the migration date.
Convert the data into the Xoro Upload Bills and Upload Vendor Credits templates, and then proceed with the uploads.
After the upload, verify that the AP balance in Xoro matches exactly with the AP balance in your previous system as of the migration date.
Keep in mind that the uploads are designed to preserve the aging of the bills. During the upload process, the system will assign one single item per bill, commonly referred to as a miscellaneous item. The income or expense account associated with this item should be "Opening Balance Equity" or the same suspense account used for migrating the books.
Customer Deposits:
To bring over customer deposits, use the Customer Deposit Module in Xoro to enter the transactions.
Ensure that the date for all transactions is either the migration date or a date prior to the migration date.
The bank account used should be "Opening Balance Equity." Each customer deposit can be linked to a corresponding Sales Order.
Finally, verify that the customer deposit account balance in Xoro matches exactly with the balance in your previous system.
Alternatively, if customer deposits do not need to be linked to Sales Orders, you can use the Journal Entry Module for this process.
Prepayments:
To bring over prepayments, use the Prepayments Module in Xoro to enter the transactions.
Ensure that the transaction dates are either the migration date or earlier.
The bank account used should be "Opening Balance Equity," and each prepayment can be linked to corresponding Purchase Orders.
Finally, verify that the prepayments account balance in Xoro matches exactly with the balance in your previous system.
Alternatively, if prepayments do not need to be linked to Purchase Orders, you can use the Journal Entry Module for this process.
Sales Taxes:
Use the sales tax adjustment module to bring over the sales taxes.
Go to prepare tax return > Select your sales tax form> Use the adjustment line to create the opening balance adjustment.
Again the date to be used here Is the migration date and the offset account is opening balance equity.
All Other Accounts:
Use the Journal Entry Module in Xoro to bring over balances for other accounts.
Open SO’s/ PO’s and MO’s
As an essential part of the Go-live process, It is required to bring over all the open sales orders, open purchase orders, and open manufacturing orders.
Use Xoro’s upload sales order, upload purchase orders, and upload manufacturing orders template to bring over all the open orders into the system.
Historical Sales and Purchases
If needed, transfer historical sales and purchases as non-posting GL transactions to maintain records without affecting account balances.
Final Check
After completing the migration, ensure the trial balance in Xoro matches the trial balance from your previous system as of the migration date. This confirms a successful migration of your books.
By following these detailed steps, you can ensure a smooth and accurate migration of your accounting books to XoroERP, facilitating seamless financial management and operations.
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