Accounting Data Migration A Detailed Guide

Are you overwhelmed by the complexities of accounting data migration services? Do you struggle with accounting software migration or the intricacies of financial data migration? Are you upgrading to a new ERP (Enterprise Resource Planning) system or transitioning to cloud accounting? 

Our comprehensive guide will demystify the process. We ensure a smooth and secure migration for your business. In this blog, discover expert tips, best practices, and step-by-step instructions to make your data migration journey hassle-free and efficient.

What Is Data Migration?

Data migration in accounting means moving financial data from one ERP system to another. Switching to modern ERP systems helps businesses in multiple ways. It makes it easier to access data. It also lowers costs and keeps operations running smoothly. Additionally, businesses gain an advantage with improved features and analytics. 

Data migration in accounting is transferring financial information to a new system. Upgrading to modern systems benefits businesses. Companies frequently require this procedure when upgrading to newer software, merging data, or transitioning to cloud-based platforms. Accounting information holds significant importance. 

This includes confidential financial documents and past transaction specifics. Organizations must carefully organize and carry out the migration procedure. This approach maintains the integrity, precision, and protection of data.

Why Is Data Migration Important In Accounting?

Data migration is crucial for businesses in the accounting sector as it enhances data management, security, and compliance while improving operational efficiency and scalability. By transitioning to modern systems, businesses can ensure better data accessibility. They can also reduce costs, maintain business continuity, and gain a competitive edge through advanced features and analytics.

ERP Migration Process

Data Extraction from Native ERP

Data extraction from a native ERP system is the initial step in the data migration process. It involves retrieving all relevant data from the existing ERP system to prepare it for transfer to a new system. The Data Extraction from the Native ERP process is crucial as it ensures that you capture all necessary data accurately and completely.

Key Points of Data Extraction:

• Identification of Data Sources: Determine which data sets, such as financial records, customer information, and inventory data, need to be extracted from the current ERP system.

• Data Selection: Select the specific data fields and records required for migration, and ensure that you extract only relevant and necessary data.

• Extraction Methods: Utilize appropriate extraction tools and methods, such as SQL queries, API calls, or built-in ERP export functions, to retrieve the data.

• Data Integrity: Ensure that you extract the data without any loss or corruption, maintaining its integrity for subsequent migration steps.

• Documentation: Document the extraction process, including the data sources, methods used, and any issues encountered, to facilitate troubleshooting and validation.

Migration of Non-Financial Data

Transferring non-financial data to a new ERP system is indeed a critical step in the data migration process. This process involves moving various types of business information beyond financial records to ensure the comprehensive functionality of the new system. Here’s an elaboration on the types of non-financial data involved and the process for transferring them:

Types of Non-Financial Data

Customer Records

Includes customer names, contact information, purchase history, and account details. Essential for maintaining customer relationships and ensuring continuity in customer service.

Vendor Records

Contains information about suppliers, including contact details, payment terms, and transaction history. Crucial for managing supplier relationships and procurement processes.

Employee Records

Encompasses employee personal information, job roles, payroll data, and performance records. Necessary for HR management, payroll processing, and compliance with labor regulations.

Chart of Accounts Records

Lists all the accounts used in the organization’s general ledger, including account numbers and descriptions. Vital for financial reporting and ensuring consistency in accounting practices.

Item/SKU Records

Includes product details such as item codes, descriptions, pricing, and inventory levels. Essential for inventory management, sales, and procurement processes.

Sales Items

Information on products or services sold, including sales history, pricing, and customer preferences. Important for sales analysis, forecasting, and customer relationship management.

Purchase Items

Data on items purchased, including supplier details, purchase history, and pricing. Crucial for managing procurement and inventory levels.

Kits/Assembly Records

Information on product kits and assemblies, including component details and assembly instructions. Necessary for manufacturing processes and inventory management.

Migration of Financial Data

There are two main approaches to migrating financial data:

Single Point Data Migration

This approach to data migration involves transferring only the open balances as of a specified cutoff date through a Trial Balance (TB) transfer. This approach to data migration is known as the Trial Balance (TB) transfer method. It is a cost-effective strategy that organizations use during ERP system transitions. This method allows companies to focus on essential data. Here’s a more detailed explanation of this method:

Process Overview

Identify Open Balances

Determine all open balances and transactions as of the specified cutoff date. This includes open invoices, open payments, open credit memos, open bills, open vendor payments, open vendor credits, open sales orders, and open purchase orders.

Trial Balance Transfer

Transfer the open balances to the new ERP system through a Trial Balance (TB) transfer. The TB reflects the financial position of the business as of the cutoff date. It captures all open balances. However, it does not include historical transactional data.

General Ledger (GL) Impact Calculation

Calculate the impact of the open documents on the General Ledger (GL). This involves determining the financial effect of the open transactions on the GL.

Journal Entry (JE) Adjustment

Reverse out the GL impact of the open documents via a Journal Entry (JE). To ensure that the TB as of the cutoff date matches the previous ERP system’s records. This step ensures that the financial data in the new ERP system is accurate and consistent with the previous system.

Advantages of Single Point Data Migration 

Cost-Effective

This method is less expensive as it involves transferring only essential data, reducing the complexity and time required for the migration. Most ERP systems, including SAP, NetSuite, QuickBooks Online (QBO), and Sage, recommend this approach due to its efficiency and cost-effectiveness.

Simplicity

By focusing only on open balances and essential transactions, the migration process is simplified, reducing the risk of errors and data corruption. This approach is easier to implement and manage, especially for businesses with large volumes of historical data.

Reduced Downtime

Since the migration process only includes current and open transactions, the team can complete it more quickly, minimizing business disruption. Ensures that the new ERP system is up and running with minimal downtime, allowing for a smoother transition.

Data Integrity

Excluding historical data minimizes the risk of data corruption and inconsistencies. This approach ensures that the financial data in the new system remains accurate and reliable.

Historical Data Migration

Historical Data Migration can be further classified into two types:

Historical Data Migration with Opening Balances as Zero

In this data migration approach, all historical activities from the previous ERP system are recreated in the new system, either manually or through CSV imports, with the opening balances set to zero. The historical data migration approach with opening balances set to zero is suitable for businesses that require a complete transfer of past transactional data to the new ERP system. 

We recommend this approach for organizations that need detailed historical data in their new ERP system. These organizations should be prepared to invest the necessary time and resources to ensure accuracy and completeness. This method is comprehensive and involves meticulous attention to detail to ensure accuracy and completeness. Here’s a detailed explanation of the process and its implications:

Post Migration Process Overview

Recreation of Historical Activities

Organizations recreate all past transactions and activities from the previous ERP system in the new system. They can do this manually by entering data directly into the new system or by importing data via CSV files. This includes all types of transactions such as invoices, payments, credit memos, bills, purchase orders, and sales orders.

Manual Document Relationship Building

Manually establish relationships between documents to ensure data integrity. This step is crucial for maintaining the accuracy of linked transactions. It ensures correct associations between payments and specific invoices. It also maintains accurate links between credit memos and particular customer accounts.

Reconciliation of Accounts

Reconcile all credit card and bank accounts in the new ERP system. This involves ensuring that the balances in the new system match the actual bank and credit card statements.

Recreation of Bank Reconciliations

Recreate bank reconciliations to ensure that all transactions are accounted for and accurately reflected in the new system. This step helps verify that the data migration process has not introduced any discrepancies in the financial records.

Key Considerations

Accuracy and Completeness: Given the complexity of recreating historical data, it’s essential to ensure that all data is accurately transferred and that no transactions are omitted.

Resource Intensive: This approach requires significant time and effort, as the team must carefully enter and verify each transaction.

Cost Implications: Due to the extensive labor and complexity involved, this is the most expensive data migration method.

Advantages Of Historical Data Migration with Opening Balances as Zero

Comprehensive Data Transfer: All historical data is available in the new ERP system, providing a complete record of past transactions.

Detailed Financial Analysis: With all historical data present, businesses can perform detailed financial analyses and reporting.

Challenges Of Historical Data Migration with Opening Balances as Zero

High Complexity: The manual nature of this approach increases the risk of human error, which can lead to data inaccuracies.

Time-Consuming: The process can be lengthy, potentially causing delays in the full implementation of the new ERP system.

Historical Data Migration with Opening Balances as Not Zero

For companies with a long operational history, managing data migration can be particularly challenging. This is especially true for businesses that have been operating for 100 years or more. When a CFO decides to limit data migration for a new ERP system, they often focus on the previous five years of data. In this case, a strategic approach is essential. It ensures efficient transfer and reconstruction of the data. Here’s a detailed explanation of this process: 

Process Overview

Selection of Cutoff Date

Choose a specific cutoff date, such as December 31, 2019, to delineate the historical data to be migrated. This data serves as the focal point for data migration, ensuring that the team transfers only relevant data from the past five years.

Single-Point Data Migration

Conduct a single-point data migration on the chosen cutoff date. This involves transferring all relevant data as of the cutoff date, including open balances and transactions that are still active.

Reconstruction of Subsequent Transactions

Reconstruct transactions that occurred after the cutoff date in the new ERP system. This process is similar to the historical data migration approach with opening balances set to zero. It involves entering transactions from the past five years into the new system. This can be done manually or systematically.

Reconciliation and Verification

Reconcile all accounts and transactions to ensure accuracy and completeness. This includes verifying that all reconstructed transactions match the records from the previous ERP system, ensuring data integrity.

Key Considerations

Carefully select the data to be migrated to avoid unnecessary complexity and ensure that only essential information is transferred.

Resource Allocation: Allocate sufficient resources, including time and personnel, to manage the reconstruction and reconciliation processes effectively.

Cost Factors: The cost of this migration approach depends on several factors. These include the volume of transactions and the number of months between the cutoff date and the current date. The complexity of the data involved also affects the cost.

Advantages Historical Data Migration with Opening Balances as Not Zero

Focused Data Transfer: By limiting the data migration to the past five years, companies can reduce the complexity and volume of data to be managed.

Relevant Historical Data: Ensures that the new ERP system contains all necessary historical data for recent financial analysis and reporting.

Challenges Historical Data Migration with Opening Balances as Not Zero

Moderate Complexity: While less complex than full historical data migration, this approach still requires careful management to ensure accuracy.

Potential for Errors: Manual reconstruction of transactions can introduce errors, necessitating thorough verification and reconciliation.

	Single Point Data Migration	Historical Data Migration with Opening Balances as Zero	Historical Data Migration with Opening Balances as Not Zero
Data Scope	Transfers only open balances as of a cutoff date.	Recreates all historical activities with opening balances set to zero.	Recreates all historical activities with accurate opening balances.
Data Availability	Limited to open transactions and balances as of the cutoff date.	Provides complete data for the past five years but not earlier.	Provides complete historical data, including all balances.
Cost	Moderate cost depends on the number of transactions and months involved.	High cost due to extensive effort and manual processes.	The highest cost is due to the need for precise data transfer and reconciliation.
Data Integrity	Ensures data integrity for open transactions only.	Ensures comprehensive data integrity for recent transactions.	Ensures full data integrity across all historical data.
Complexity	Low to moderate complexity.	High complexity due to manual reconstruction of historical data.	Very high complexity due to detailed reconstruction and accurate balance transfer.
Time Required	Shorter time frame due to limited data scope.	Longer time frame due to manual processes and validation.	Longest time frame due to detailed data reconstruction and validation.
Use Case	Suitable for businesses needing recent data without historical details.	Suitable for businesses needing detailed recent data without full historical context.	Suitable for businesses requiring full historical data for analysis and reporting.
Risk of Errors	Lower risk due to simpler data scope.	Moderate risk due to manual data entry and reconstruction.	Higher risk due to complexity and volume of data.
Recommended For	Companies looking for a cost-effective and efficient migration.	Companies need detailed recent data with limited historical context.	Companies need a complete historical record in the new system.

Creation of Schedules

Creation of schedules is a crucial step in the data migration process, especially when transitioning to a new ERP system. This step involves setting up various financial schedules that ensure the accurate tracking and management of key financial activities. Here’s a brief elaboration on the types of schedules that need to be created:

1. Fixed Asset Registers

To maintain a detailed record of all fixed assets owned by the company, it is essential to include specific information. This information should encompass asset descriptions, acquisition dates, purchase costs, and asset locations. By doing so, the organization ensures that it accurately tracks all fixed assets. This tracking is vital for accounting and reporting purposes.

2. Depreciation Schedules

To calculate and record the depreciation of fixed assets over time, it is essential to include methods of depreciation (e.g., straight-line, declining balance), useful life of assets, and accumulated depreciation. This ensures that the accounting team accurately reflects the depreciation expense in the financial statements, complying with accounting standards.

3. Revenue Recognition Schedules

To manage the timing and recognition of revenue in accordance with accounting principles, it is important to include details on when and how revenue is recognized, based on contracts, delivery of goods, or completion of services. This ensures compliance with revenue recognition standards (e.g., ASC 606) and provides accurate financial reporting.

Validation and Documentation of Data Migration

After migrating data to a new ERP system, data validation is crucial for the accuracy and integrity of the migration process. This step ensures that the team has transferred all data correctly and that it functions as expected in the new system.

Validation of Data Migration Process

Accuracy Checks: Conduct thorough checks to verify that all data has been accurately transferred. This includes comparing data between the old and new systems to ensure consistency.

Functional Testing: Test the functionality of the new system with the migrated data to ensure that all processes, reports, and integrations are working correctly.

Reconciliation: Perform reconciliations to confirm that financial balances and other critical data match between the systems.

Documentation of Data Migration Process

Comprehensive Records: Prepare detailed documentation of the migration process, including steps taken, tools used, and any issues encountered.

Notes and Commentary: Include notes and commentary to provide context and explanations for decisions made during the migration.

Audit Trail: Maintain an audit trail to track changes and ensure accountability, which is essential for compliance and future reference.

Deployment and Testing of Approval Workflows, Scripts, and Integrations

The final step in the ERP data migration process involves deploying and testing approval workflows, scripts, and integrations to ensure they function correctly within the new system.

Deployment 

Approval Workflows: Implement approval workflows to automate and streamline business processes, ensuring that they align with organizational policies and procedures.

Scripts: Deploy custom scripts that automate repetitive tasks and enhance system functionality, tailored to the specific needs of the business.

Integrations: Set up integrations with other systems and applications to ensure seamless data exchange and interoperability across platforms.

Testing

Functionality Testing: Conduct thorough testing to verify that approval workflows, scripts, and integrations operate as intended without errors or disruptions.

User Acceptance Testing (UAT): Engage end-users in testing to ensure that the deployed elements meet business requirements and user expectations.

Performance Testing: Assess the performance and efficiency of workflows, scripts, and integrations to ensure they do not negatively impact system performance.