hurrah! Break out the chocolate and skip this section!
If the balances don’t match, it may be because a supplier has been paid but the cheque or payment hasn’t been presented on the bank statement or, vice versa, you’ve paid a client by cheque and it’s not cleared yet. This payment or receipt eventually hits the bank statement, and the Xero bank balance. Follow these steps to prepare the accounts in anticipation of this:
1 Identify the balance of unpresented payments or uncleared funds by running a bank reconciliation in the old system as at the conversion date.
2 Create an asset account in Xero called Uncleared Funds and a liability account in Xero called Unpresented Payments.Refer to Chapter 2 for information on creating new accounts. Select the option Show on Dashboard. The goal of this exercise is to return the balance to nil and, once at nil, you’d remove this option from the two accounts.
3 Enter the balances identified in Step 1 in the Uncleared Funds and Unpresented Payments conversion balance.
4 Pre-empt the transactions hitting the bank statement by entering the individual transactions identified in Step 1 as Spend Money and Receive Money transactions.Allocate the Spend Money transactions to the Unpresented Payments account.Allocate the Receive Money transactions to the Uncleared Funds account.See Chapter 8 for information on Spend Money and Receive Money transactions.Consumer tax has already been reflected in your conversion figures, so allocate a not reportable tax rate to all transactions entered here.
5 When payments are recognised in the bank statements, code them in Xero to the Uncleared Funds and Unpresented Payments accounts.
6 Check off the payments as they’re recognised.The amount entered into the conversion balance should be reduced to nil.
If that doesn’t sort out your balances, check transactions prior to the Trial Balance bank balance haven’t been included in Xero (which would mean they’ve been double counted). Double counted transactions need to be deleted — see Chapter 4.
Turning Off Your Old System
You and your staff may be feeling apprehensive about the big switcheroo — that is, moving your accounting operations entirely across to Xero. To ensure the move goes smoothly, you may need to manage staff expectations. If staff are involved in your accounting operations, incorporate them in the decision-making process, provide adequate training, and be prepared to answer their questions.
Questions staff (or you) have may include the following:
What if I need access to historical data?
How can we move to the new system?
When is the switchover date?
The following sections provide you with some answers.
Accessing historical data
You can still refer to the old system for detailed historical information. Although historical balances can be entered into Xero for comparative purposes, your old accounting system should be relied upon for a detailed history. Create a file directory entitled something like ‘Historical Financial Data’ and move all your historical information to the file for future access.
If you were using an accounting solution where you were paying an ongoing subscription fee to them, you no longer have to make this payment — nice to be saving some money, hey?! — but you should still be able to access your data. As time goes by, however, if you upgrade your computer, you may no longer be able to install ‘old’ accounting software on a ‘new’ operating system. You’ll never have these problems with a web-based product like Xero, but they’re unavoidable with desktop software.
Moving to the new system
You can approach pulling the plug in a couple of ways:
Set up Xero and switch over instantly: This means you’re no longer actively using the old accounting system, and you’ve focused all your energies on learning and using Xero.
Set up Xero but run the accounting systems in parallel: This means energies are divided between working on the old and new system and on learning Xero — and you’re probably going to spend extra time out of your day running two systems. However, it means you can compare reports produced. Once you’re confident Xero is capturing all data, you can turn off the old system.
You need to decide what suits your style and method of operation. Make sure Xero meets your business requirements, and review what you expect from your accounting software. Then focus on getting your Xero file set up, activating bank feeds, defining a clear switchover date, and working towards the goal of moving completely to Xero as swiftly as possible — like ripping a plaster off!
Confirming the switchover date
Ideally, you want to move to a new system at the start of an accounting period — or, even better, the start of a new financial year. Activating automatic bank feeds may take up to ten business days, so if a suitable cutover date is looming in your calendar, start the process of setting up Xero early, with a focus on activating the bank feeds. Return to Xero as the impending day approaches to complete the set-up process, and switch over on the first day of the next period.
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