We’re about to do an accounting transition for a client – moving them to a new accounting environment.

They had been using Freshbooks, which is popular for freelancers and service businesses, but which lacks any real integration with payroll, or a true cash management section – in plain English, there’s no place to keep up with a checking or credit card account balance, for example.

There’s also no way to keep up with owner equity or assets, really. So it’s all right as long as you don’t pay employees, need to balance a checking account, or own stuff.

Since our client needs to do all three, we’re moving them to Quickbooks Online. The system will be “live” tomorrow, and will become the primary place we enter all financial information (it may be a little while before we get everyone out of the habit of entering stuff in Freshbooks, so we’ll be keeping an eye out for transactions over there).

The following is not intended to be a complete tutorial or checklist – just a high-level overview of how you would approach this kind of project. It can be intimidating because your accounting software provides the record of your business that’s so important when you pay taxes or if you need a loan. If you’re self-employed and your business is your primary livelihood, you’re going to have to produce these records for personal tax and borrowing situations as well.

Involve a CPA – We’re coordinating this move with a CPA – we’re doing the data entry for the client and, since technology is a big part of our core competence, selected the software, but the CPA is advising closely and will do the math involved for some general ledger entries we’ll need to make. These entries will have to be done more or less in real time as we close operations today.

Familiarize yourself with the software in advance – whoever’s doing your bookkeeping will need to be very well versed on the software on the first day that you need to create invoices, purchase orders, and whatever other forms you have to create in real time.

Your CPA should advise you on your chart of accounts, which generally needs to be customized for your business, and this needs to be set in advance so you can do transactions which use them. It’s tempting to just take the entries from your old chart of accounts and slap them in, but don’t fail to take advantage of this opportunity to weed out the old entries that don’t apply to your business, like SALES – BUGGY WHIPS.

Decide what period you’re going to start in, well in advance – you don’t just pick up one day and start using new software. Unless you’re going to keep using the old software alongside the new software until the end of time, there’s going to have to be a recognized date of transition. January 1 is actually an ideal time to start using new software, if you can manage it – if you’re using a calendar year as your fiscal year, you will have the entire year captured on the new software. If not, there’s a couple of ways you can do it:

  • just start on a month (for example, August), and recognize that the records will have to be put together from the old and new software when it’s time to give annual figures. You will get the income statements and add the key figures together for tax related expenses and revenues.
  • Go back and add in all the transactions from January 1. This is the approach we took this time because there was a manageable number of transactions. As a result, we will have a complete year’s records in this software, even though we weren’t using it all year. For most companies of any size, this is pretty tedious, but if you can manage it, you’ll have a bit more history and complete records for the year.

Keep the old software in working order because you’re going to be needing it for a while. When the customer calls about the order they did before the transition, when you need to know what a customer bought last year – you’ll need that information, and the history will generally not be there in the new software, unless you’ve done a massive import going a long way back. For tax purposes, consult a CPA as to how long you’ll need to retain all the records. Hard copies will work, but most of us are not printing hard copies of every transaction anymore.

And yes, this feature makes the cloud-based software seem a little bit less of a bargain. We’ll have to decide how long we’ll have to subscribe to Freshbooks. Their export functions are very limited.

Again, this is only a high level overview, not a how-to. If you’re facing an accounting transition contact us for a no-obligation consultation.