Why Move Opening Balances into a New ERP System?

Your company made the decision to move to a new batch and process manufacturing ERP system. You are so excited because this is a chance to start fresh, so you are going to consolidate accounts and not bring over dirty or historical data. Soon you are thinking, “I will use the old system for all my existing orders and my new system will be used for newly created transactions. This will create less work to get the new ERP system up and running.“ This is a perfect idea, right?

Stop right there… NO! This is a terrible idea for the following reasons:

• Auditors would find issues with you having two systems to manage your accounting records.
• You won’t have one system of record which means you need to look between two systems to:
  • Find net income.
  • Find financial statements.
  • Identify which customers owe you money.
  • Identify what vendors need to be paid.
  • Find available cash.
• Maintaining two systems increases the chances of someone making a mistake because you must make entries in both systems, and you run the risk of forgetting to do it one system.
• Not having this data at go live causes several problems including:
  • Difficulty creating reports for the bank and auditors.
  • Doubling the work for accounting as they will need to pull reports from both systems and then consolidate them in excel.
  • Difficulty reconciling balances when they are eventually brought into your new system because some transactions are in each system.
  • Potential of balances never being brought into the new system.
  • The following reports would need to be calculated in both systems:
    • Sales tax returns
    • 1099’s
    • Tax returns
    • Commissions
• Maintaining two systems makes it easier for unscrupulous people to steal.

Now that we know why we need opening balances, open AR and AP, the next question is how they can be brought into the new system. One way to do it is to have your accounting department do a journal entry to bring in all the opening balances. The second and most common way is to have a data conversion team import all the information for you.

The implementation team performs several data mock go lives to ensure the data in our customer’s old system matches what is in the Deacom ERP system. The purpose of the multiple mock data go lives is to ensure you can accurately and consistently retrieve date from your old system and bring it into Deacom easily. This gives you the opportunity to validate the data and determine any discrepancies early on.

Deacom requires you to bring in open AR by customer and open AP by vendor. We also require an opening balance for the month you go live. Normally we see monthly GL balances for the year you are going live.

The adage of no pain, no gain holds true yet again. If you don’t go through the pain of bringing in opening balances, open AR and AP, you won’t get the gain of using a great new system.