• CALA Associates Ltd

Helping you move to Xero!

It's no secret that we are huge fans of Xero - We're Xero Gold Partners and we provide Xero to all of our clients.

Xero is a powerful tool with a mass of app integrations and add-ons that in our opinion make it an unmatched and dynamic accounting software perfect for every business.

Whilst I would strongly advise anyone considering moving to Xero to reach out to us - we are Xero Accountants and Consultants. We can undertake the full migration for you or recommend the best approach and give detailed advice on how to get this 100% right for your business. That said, we're totally aware in the current business times we're in this may not be affordable for some businesses so in this article I will outline the process and provide some hints and tips on how to get started on this yourself.

The Timing...

It is always best to move to a new accounting system at your financial year-end. This is the period your accounts are made up to and differs from business to business. The end of the financial year represents a logical cut-off point where financial data won't change.

The Preparation...

Before switching to Xero you will need to ensure that your current accounting system is well maintained and tidy. Here are a few things to check for:

  • Are your bank accounts fully reconciled and do the closing balances agree to your physical bank balance at that date?

  • Are your Aged Debtors/Creditors accurate? e.g. Does what your accounting software tells you you are owed from customers and owe to suppliers accurate?

  • Are your control accounts accurate e.g. does your VAT account match what's been filed with HMRC? Are your PAYE/NI accounts in agreement with what you owe?

  • Analyze your customer and supplier accounts, if you have any "payments on account" or "overpayments" that have not been allocated to an invoice or bill. Go ahead and tidy this up.

  • Reflect. Particularly reflect on your Chart of Accounts. How well does it reflect your business? Do you have lots of unused accounts? Do you think more accounts might help you understand your numbers better? Take your time. This might be important when deciding on your approach!

If you're struggling, your Accountant can help you with this.

The Approach...

OK, you now have a super tidy accounting system ready to move to Xero. You'll now have two options. A data migration software VS manual set up. This is where your reflection comes into play...

  • Data migration tools bring over historical data and mirror what you had in your current software automatically. That's amazing? Right? Not always, it provides very little scope for changing your setup but if you're happy with how you're set up or place a heavy reliance on interrogating past data in detail then it could be. There is a catch though....there are limitations to how effectively these tools work and require the user to read, understand and follow instructions carefully.

  • Manual Setup as you may have guessed is often more complicated and always more time consuming; however, it gives you the opportunity to configure your new system exactly how you want it! For example, removing or adding nominal codes to improve your grasp of the numbers; cutting our unused customer or supplier accounts; updating customer/supplier details etc

Really the best method for you is going to be a personal choice but for me? I always lean towards the manual setup. As a consultant and advisor building, a finance function that's perfect for you and your business is much easier from scratch and allows you to harness the full power of Xero.

The "How To"...

  1. Manual Setup

  • The first step is your chance to identify what you want to change. Carefully look at what you want to bring over, what you don't want to bring over, and what you may want to add.

  • Now for some admin. You'll need to create your Xero account, choose your subscription and fill out your organisation/financial information and branding e.g. Company name, address, VAT scheme, financial year-end, logo, etc

  • Once you have done that, it's time to set up your chart of accounts. You could import your current chart of accounts from your previous software but if you have selected this option, I'm guessing you wanted to make some changes. You can do this by selecting the default chart of accounts and begin customizing it to your needs e.g. addition of more detailed sales accounts or personalized expenses accounts for example. Remember, this needs to work for you so make sure you can easily see what you want to see when analyzing your numbers.

  • Connect up your bank accounts - there are lots of videos on how to do this so I won't go into detail - most banks have an automated feed that draws in your transactions automatically.

  • Export your Suppliers and Customers from your old system into a CSV/Excel format. Take the chance to remove any legacy contacts or duplicates.

  • Export your Trial Balance at your conversion date from your previous software and create a "mapping document" based on the Chart of Accounts. This guides you on where old balances will be in your new system. For example, in SAGE you may have had "Accountant Fees" but in Xero, you have "Audit and Accountancy". This just makes life easier when entering your opening balances.

  • Use your updated Supplier and Customer list. Import your contacts into Xero. This is accessed from Contacts - Customers/Suppliers - Import. Download the template provided and move the data over.

  • Using the mapping document you have created, enter your opening balances at the date of conversion. This is accessed through Settings - Advanced - Conversion Balances.

  • Import the individual Invoice and Bills that were unpaid at the conversion date.

2. Data migration tools

  • There are several data migration tools available e.g. Movemybooks. Be sure to read the instructions and limitations carefully. Movemybooks publish theirs openly.

  • Once you have decided on your migration tool you'll need to set up both an account with them and with Xero.

  • You will be prompted to decide how many years of historical data you wish to import. 24 months is standard and often free. Additional years are chargeable.

  • Set up your financial year and the date you wish to bring over the data. This will be your conversion date. As recommended at the start of this article, I recommended this is your last financial year-end.

  • Select the software you are moving from and follow the instructions in detail.

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