Financials and Cash Flow

Budget tools: 10 steps for changing your accounting software

Here are some considerations to help you choose and use a new accounting program.

Perhaps you have been in business for a while and you are ready to upgrade your accounting software program. Or, perhaps you are a startup and you are looking to put an accounting program in place for the very first time. Either way, it is important to plan properly and roll out the new accounting system in a disciplined manner. Here are 10 steps to help ensure a smooth transition before you deploy new accounting software.

1. Select the right accounting software program.

For small businesses, QuickBooks, FreshBooks, and Xero are some of the most popular accounting program options. For larger and more sophisticated businesses, though, these programs may have limitations. For example, they may not have special point-of-sale features to automatically track the sale of inventory, or a good way to track customer history. As you grow, you may want to consider third-party programs that do those things and can work with your existing accounting package, or you may wish to find a separate, industry-specific program that will address your particular needs.

2. Pick a date for your transition.

This is when you will enter all data into your new accounting program and stop entering data into the old system. To simplify and streamline the transition, pick the beginning of a year or quarter.

3. Follow the software guidelines.

Use the software in the way it was designed. You'll have more success if you learn to use it correctly, so watch tutorials and instructional videos. Seek help from the product's support team, if needed.

4. Back up old files.

Always create the option of restoring your previous data and settings, in case something goes awry. Historical accounting data is not only important for a backup, but also for seeing how your business has progressed over time.

5. Assemble the data you will need for the beginning balances.

What do you have for assets and liabilities? Assemble verifiable documentation from bank statements, credit card statements, loan documents, invoices for asset purchases, and tax returns.

6. Create the new file.

Always create the working file of a new program on the last day of the previous year, even if your transition date is in the middle of a year, so as to align everything with the new year. Enter ending balances in the balance sheet accounts as of the last day of the last year. These balances become the beginning balances for the current year.

7. Update and upgrade your accounts.

Delete or make inactive the accounts that you don't want or need. Explore the options for organizing the data that best work for you: classes, departments, items, or account numbers. Map out a strategy for getting enough information about different areas of your business (i.e. big jobs, small jobs).

8. Enter customers and vendors.

Unless you are certain the data will come through in a usable fashion, don't migrate past dollar transactions with the vendor and customer files. Just migrate the empty accounts to populate moving forward.

9. Create your accounts payable and accounts receivable history.

As of the last day of last year, enter any invoices that were created in the prior year but not paid until the current year. Do this for vendors and customers.

10. Get going.

Enter data from the beginning of the current year as soon as possible. As you go, create written procedures for the following data entry transactions:  

  • Entering sales

  • Applying customer payments

  • Making deposits

  • Entering bills

  • Paying bills

  • Entering credit card charges

  • Paying credit card statements

  • Entering payroll

The bottom line is that the balances have to be right, so involve your accountant or tax preparer in the process. The accounts should reflect what you have, owe, and own. The accounting should accurately record sales and expenses. And make sure your accountant signs off on your plan and your implementation.