BEST PRACTICES FOR GETTING STARTED
A HOW-TO GUIDE FOR IMPLEMENTING ACCOUNTING SOFTWARE

Thomas G. Stephens, Jr., CPA, CITP

Accountants frequently implement accounting software, either for their employing organizations or for their clients.  When facing this task, one of the biggest issues that arises is how to get initial data into the new system.  Three principal methods for doing so exist:

1. Setting up the system from “scratch” by manually entering all required data,
2. Convert data from an existing application into the new application, or
3. Import template data into the new application on an as-needed basis.

The most efficient and effective method will of course be dependent upon the specific circumstances surrounding the project.  For example, if the organization is a start-up and does not yet have an accounting application in place, then converting data from an existing system is obviously not an option.  On the other hand, if the new accounting application supports direct conversion of existing transactions and masterfile data from the previous accounting application, then that method will often produce the best results in the least amount of time. Obviously, the accountant must conduct a detailed review of the project to determine which of the three options presented above offers the best approach.

 

SETTING UP THE SYSTEM FROM SCRATCH

This will likely be the preferred method when the company is not currently utilizing any accounting software.  Secondarily, some key data elements will likely need to be entered manually even when template data is used as a foundation for the new accounting system.
When choosing this method, the logical starting point is accumulating all of the key pieces of data required to successfully set-up the accounting application.  Included are items such as:

• The most recent bank statement and all outstanding checks and deposits in transit,
• Customer, vendor, and employee names, addresses, and other critical masterfile data,
• Inventory part numbers, quantities, valuations, etc.,
• The most recent trial balance, and
• Detailed sales tax balances.

Once all of the required data has been accumulated, most accounting applications – including Microsoft Office Accounting – provide a wizard for guiding users through entering the data into the system. Generally, this process involves entering basic company data followed by the selection of fiscal periods and a start date.  After establishing the start date, the next step is to enter beginning balances for the trial balance. A good rule of thumb is to set the start date in the prior fiscal year, enter beginning balances as via a journal entry in the prior fiscal year, and then to close that fiscal year before entering any data in the current year. This facilitates preparation of year-over-year comparative financial statements. Additionally, beginning balances for customers and vendors should usually be entered not as summary entries, but rather by entering individual invoices or bills for each transaction making up a beginning balance. This allows users to identify and manage these balances more efficiently and effectively in accounts payable and accounts receivable. Upon entering all beginning balance data – trial balance, accounts receivable, accounts payable, inventory, and payroll – verify that all amounts have been entered correctly by comparing data in the new system to reports generated by its predecessor.

 

CONVERTING DATA FROM AN EXISTING APPLICATION

Most accounting applications today support conversion of data from competitive products. For instance, Microsoft Office Accounting facilitates converting both detailed and summary data from specific versions of QuickBooks. When an accounting application can convert existing detailed data from its predecessor, that will almost always be the preferred method for creating the new data file.
Converting detailed data involves converting transactions in addition to masterfile data.  If the new application will only convert masterfile data from the predecessor, then some manual entry of balances and transactional data will be required, using the guidelines established in the previous section.
Additionally, even in those situations where direct conversion of data from one system to another is not an option, it may be possible to convert data through an export/import process.  Virtually all systems allow users to export key tables of data such as charts of accounts, customer and vendor lists, inventory item lists, etc. to either Excel or to a text file.  Likewise, virtually all systems have some type of import utility allowing users to import data from either Excel or from a text file. Therefore, if data can be exported out of the predecessor system, it can usually be “mapped” to the match the format of the new system and imported with very little effort, saving tremendous amounts of time compared to manually entering this information.

 

IMPORTING TEMPLATE DATA

In those instances where an accountant is repeatedly setting up accounting systems for companies that are similar in nature – for example, medical practices – then the accountant might consider setting up template data that can be used whenever a new data file is required for a company in that specific industry.  Following the medical practice example, the accountant could establish a template chart of accounts specifically for a medical practice and then use that chart of accounts for all future data files created for medical practices. This concept will allow the accountant to create industry-specific data files in a fraction of the time otherwise required. Of course, once the template data has been imported into the new data file, the accountant would manually enter account, customer, and vendor balances.


DON’T FORGET PREFERENCES AND SECURITY SETTINGS

Part of the process of setting up a new data file includes establishing preferences and security settings. This is a critical step in setting up a data file, regardless of which of the tree methods described previously is chosen. Unfortunately, end-users often overlook this task when they set up their own systems. In Microsoft Office Accounting for example, key preferences include enabling the Change Log, activating account numbers in the chart of accounts, enabling class tracking, and defining the accounting basis as either cash or accrual. Failing to set preferences so that they match the specific needs of a company means that the system will not perform as well for the company as it otherwise could; accordingly, accountants creating data files should review all preferences and options to ensure that they are configured appropriately for the company.
Most accounting applications today have robust security regimes that afford access to individual users or groups of users to only those areas of the application required by their specific job description.  Enabling these security settings is a significant first step toward implementing effective internal control. As with preferences, accountants should ensure that appropriate security settings are in place for each user or group of users.  Particular attention should be placed on limiting the number of users who can log on to the system with “administrator” privileges.


SUMMARY

Through the use of wizards and export/import processes, the process of setting up a data file is much simpler today than it was even just five years ago.  For accountants charged with the responsibility of successfully setting up a data file for a new accounting system, a critical decision to be made will be whether the file should be created from “scratch” or whether data can be converted from an existing application or template.  In some cases, utilization of multiple methods may be required in the same installation.  Regardless of the method(s) chosen for establishing the data file, ensure that all balances are entered correctly and that all preferences and security settings are appropriate for the company to ensure maximum performance and internal control is derived from the new accounting system.

Mr. Stephens is a shareholder in K2 Enterprises, where he develops and presents technology-related continuing professional education programs to accounting and finance professionals across the United States.  You may reach him at tommy@k2e.com.

 

The views and opinions expressed in this column are those of the author and do not necessarily reflect the opinions of Microsoft.