We sometimes get asked for advice about whether or not it's okay to change accounts packages mid-year. It's not unusual for customers to feel wary about implementing such software any other time than the end of the financial year. But if this gets in the way of your project plans - don't worry! It needn't!
We've helped lots of companies implement a new MIS and a new accounts package at the same time (it's actually very common) and it's no different than implementing an additional module of your MIS. You just need to plan ahead and have the resource available to carry out the project tasks.
So... can you change your accounts package mid-year? The short answer is yes, absolutely.
But... should you? Let's take a look at the pros and cons.
Why you shouldn't change mid-year
The thing that puts many corporate accountants off this approach is the idea of having that year's financial data spread across two systems. This means that management accounts will have to be produced using a spreadsheet to bring the two sets of data together (although actually this is pretty common anyway, even if you're not switching). You'll also have to use both systems to retrieve any transaction data requested by the auditors at year-end.
Why you should change mid-year
Year-end is a very busy time of year, so you might not want to implement a new MIS and a new accounts system at this time. For medium sized businesses, changing at year-end could actually be the worst time - there are all sorts of reporting pressures around then and it might not be the best time to learn how to use a new accounts package. The first month or so of the new year is also problematic if periods from the old year are still open, or auditors are visiting.
In this scenario it's probably better to get the year-end audit out of the way and to think about changing mid-year. This gives you time to learn the new system and understand its quirks before you have to tackle the next audit.
How to go about switching mid-year
If you did decide that you wanted to switch systems mid-year, there are 2 approaches to doing this, based on whether or not you use monthly management accounts.
If you have monthly management accounts
If you have a set of monthly management accounts, you would effectively have to cut off transactions at month-end and do the following:
Post outstanding sales invoices into the sales ledger.
Post outstanding purchase invoices into the purchase ledger.
Post bank account balances and remaining balance sheet accounts.
Reverse out any accruals and prepayments to the P&L codes (so the balance on accruals and prepayments is nil).
Once you have done this, you then start posting into the new system.
At year end your balance sheet will be correct on the new system and you will simply have to add the two profit and loss account balances (old system and new system) together to get your annual figures.
If you don't have monthly management accounts
If you don't work to a monthly set of management accounts then, at the date of transfer, you just need to set up your sales, purchase and bank accounts as described above, putting the balance figures to a suspense account.
Then at year-end, add all the trial balance figures together from both systems with the exception of sales and purchase ledgers and bank account. The brought forward balances of these three accounts should be contra'd against the suspense balance in the new system.
Do I need to keep paying for the old system until year-end?
It would be easier from an audit point of view to have both systems available, but if you didn't want to carry on paying the subscription on your previous system, you would just need to download all the data within it so transactions can be interrogated by the auditors, if required.
It's worth pointing out that you are going to need to do this anyway to comply with the government legislation that requires companies to retain financial data up to a certain length of time.
Still not sure? How about this approach:
If you're only a month or two into year-end - reproduce the information from the old system into the new one.
If it's going to be mid-year - keep the two systems running in tandem.
If you're only a couple of months away from year end - this one is down to preference. Some companies don't want the added stress of a year-end to interfere with the success of an MIS implementation project, whereas other companies would prefer to wait.
A caution - keep the project agile
It's worth pointing out that if your ideal scenario is to switch your MIS live on the first day of your financial year, along with the new accounts package and integration link, then this might not work out as you planned. MIS implementations needs to be agile and we only work to a specific go-live date on about 10% of our implementations, because the business priorities of our customers change as the project moves on.
Sometimes a customer will decide that they can't spare the resource to hit the deadlines that they've been set, or decide to add additional modules and want to increase the length of the project. Other times a customer will fly through the whole process with their MIS partner and be using the system weeks or even months before they had planned. That's why an agile approach is so important for MIS implementations and why, in our experience, planning on a very specific go-live date to coincide with the launch of another software solution isn't the best strategy.
At the end of the day, the timing of your project has to fit in with the needs of the whole business. While there are many factors to take into account, you don't need to be constrained by your accounts package - it's perfectly possible to switch it mid-year with a bit of planning.
For more advice and guidance on planning software implementation projects, download our free Implementation Workbook put together by our experts.