How to Migrate a Trust Bookkeeping System

Unlike dealing with your firm's operating accounts, trust bookkeeping involves additional fiduciary responsibility. You'll need a trust bookkeeping system to help you do the job and a strategy to switch from one system to another.

Choose a System That Puts You in Control

The first order of business is choosing a trust bookkeeping system that meets regulatory requirements and puts you in control. If your firm is using a manual bookkeeping system, you know the inherent problems. Manual processes are time-consuming, mistakes are difficult to detect and report preparation is next to impossible.

On the other hand, a good trust accounting software program can easily replace all manual bookkeeping tasks, bringing order to your books, tightening controls and helping you comply with state regulations.

Evaluate Trust Account Migration Options

Once you have selected the best software program to manage your trust accounts, it is important to review migration options with your CPA to determine which method is best for your firm.

There are a number of methods from which to choose. Three methods for transferring trust accounts from one bookkeeping system to another are:

Square One Option

You can start at square one and re-enter all trust data in the new software database. If your data was previously entered manually and is not well organized, option one may be the best choice. Once data is entered, the new software program can provide a clear picture of both your past and future account transactions.

Fresh Start Option

If you anticipate significant problems entering past transactions and are in a catch-22 situation, meaning until past data is cleaned up, future transactions cannot be entered in the new program, you may consider opening a brand new trust account at the same bank or a different bank. You can get a fresh start by using the new bank account and new software. In many instances, this method turns out to be the simplest solution. In a few weeks, once activities in your previous bank account have died down, you can then reconcile the old account and close it permanently. If there are un-disbursed ledger card balances left in the old account, write a check for each ledger card, move balances to the new bank account, and make deposits in the new software program.

Minimal Change Option

Use this option if you want to keep the same bank account, want to start doing bookkeeping with the new software, and do not want to re-enter all prior transactions. Follow these steps carefully for this scenario:

Step 1: Fix a month ending date to establish a cut-off from old bookkeeping system to the new one, i.e. April 30, 2009 ("reconciliation date').

Step 2: Reconcile your previous trust account books up to the reconciliation date and create a ledger card "bank" balance sheet, which shows totals of the actual money for each ledger card in the bank as of the reconciliation date. Total of these ledger card "bank" balances must match with the bank ending balance. Also, create a ledger card "book" balance sheet, which will show totals per your record, and will include transactions that have not yet cleared the bank.

Step 3: Create corresponding ledger cards in the new software program, which can be done in one of two ways.

a. Create a positive amount adjustment entry with a memo 'transfer balance from previous books' for the ledger card "bank" balance as of the reconciliation date. Then, enter all un-cleared transactions on the corresponding ledger cards (transactions of the ledger card which not cleared from the bank yet such as outstanding checks or deposits). The total of adjustment entry and all un-cleared transactions must match the total corresponding ledger card "book" balance.

b. Enter all ledger card transactions (regardless of whether these transactions have cleared or not by the reconciliation date) only for cards that have balance left. The transaction total must match the total of the corresponding ledger card "book" balance.

Step 4: All future transactions and bank reconciliations (after the final old system reconciliation date) must be done only in the new system.

Trust Account Management You Can Count On

Migrating client trust accounts from a manual to an automated bookkeeping system is not a difficult process. In a few simple steps, you can bring order to your trust accounting process, tighten controls and strengthen state regulation compliance. And, even if you are suddenly facing an audit, with well-managed trust accounts, you'll be ready.

What is Bookkeeping?

Bookkeeping is the process of keeping full and up-to-date business records. It's the recording of financial transactions. Transactions include sales, purchases, income, and payments whether by organizations or individuals. A bookkeeper must make sure all transactions are recorded in the correct daybook, suppliers ledger, customer ledger, and general ledger. Although a bookkeeper is called an accounting clerk, or an accounting technician, don't confuse bookkeeping with accounting. An accountant uses a bookkeeper's records to create financial reports. Since the jobs are similar, many bookkeepers have the potential to become (or are) accountants also.

There are two common systems that bookkeepers use to record financial transactions. Small businesses primarily use the single-entry system. This system uses only income and expense accounts, recorded primarily in a revenue (money earned) and expense journal. The double-entry system is more complicated, and makes sure that the books are error-free. This system does this by recording transactions in two different nominal ledgers (two parts) of the books, and using a balance system of debits and credits. Having the data recorded in two different ledgers allows the bookkeeper to recover from an error in one, by looking at the other...at least in theory.

Financial transactions are recorded in several different books. These, starting with the daybook, contains the most detailed records. Sometimes daybooks are not kept, so everything is recorded in journals. The totals in each section (sales, purchases, credits, cash etc.) are recorded in the ledgers. Ledgers also have different sections, and they are used to make the balance sheet and income statement. Ledgers often include:

* Customer ledger, for financial transactions with a customer (sometimes called a sales ledger).

* Supplier ledger, for financial transactions with a supplier (sometimes called a purchase ledger).

* General (nominal) ledger representing assets, liabilities, income, and expenses.

When a bookkeeper wants to check the books for errors, they bring them to a trial balance stage. At this stage, they create a worksheet listing the balance of each ledger account, in two columns (debit and credit), at a certain date. Under the double-entry system,a transaction's debits must equal it's credits. Trial balance is often used as a tool to probe for errors. If the debits and credits don't balance, then there is an error. Even if the difference of the debits and credits is zero (debits-credits=0); there can still be errors. For instance: if a transaction is omitted (error of omission), the totals will not be effected. A trial balance is a statement of ledger.

Now, bookkeeping can be done on the computer. This is called computerized bookkeeping. Computerized bookkeeping allows much of the paper "books" to be eliminated, therefore saving trees (but not electricity). The main advantage however, is the increased speed at which bookkeeping can be accomplished.

Bookkeeping can be very time consuming. Therefore most small business owners use a bookkeeping service. Large businesses on the other hand often hire a bookkeeper--or several. There is no need to visit a bookkeeper when you have the internet, however. You can submit financial information to a bookkeeper online, in the convenience of your own office!

So what are these books used for? Aside from providing strategic information to the owner, a company's books are used to allow an accountant to create financial reports, and determine what taxes companies must pay. Its for you and the government.

See also: http://en.wikipedia.org/wiki/Bookkeeping

My recommended source:

http://www.leslieandassociates.com Bookkeeping, taxes, payroll, notary, and IT services for small business.

Easy Steps You Can Take Before Changing Your Accounting System

If you're a business owner or manager, and you have process or procedural issues, you might be completely unaware of the cost or implications of these issues.

The first step is first identifying that you have an issue with your current accounting software system. But then what? How do I easily go about the process of finding a suitable replacement?

Just some of the more simple flags that will tell you you've outgrown your current accounting software could include:

- You are experiencing limited transaction functionality. There is too much manual data entry. You find yourself employing more people just to do data entry when these processes can now largely be computerized. (like integrating with a web site)

- You have added a new branch, or merged with another business, and need to have access to key information in real time, and have transparency across all of your entities.

- Your current system has started to slow down requiring you have to continually archive your data and refer to your backups.

- You have entered new markets or obtained new key accounts with more complex accounting implications. Such as "Foreign Currency" transactions that your current system does not facilitate.

- You find yourself maintaining multiple and disparate systems to do your core business functions. Like CRM (Customer Relationship Management), Manufacturing & Financial Information all being maintained separately and not integrated to share key information.

More complex requirements around integration can prove to be costly in both time spent investigating and implementing, such as:

- Streamlining all your pricing, product and supplier information across multiple branches or even with key partners in your distribution network.

- Perhaps you have been asked by your major suppliers or customers to send you electronic information and your current system either doesn't, or you have no one who can offer you an affordable solution.

Identifying what areas of your business that require attention to their systems is the first step in the process. The key thing in this identification phase is to try and quantify those areas. This will allow you to prioritise your systems needs more accurately, and give you an indication on a suitable selection, design and implementation cost to solve that problem.

A recent example with a distribution company, they had an issue with their telephone sales people entering in the wrong products at the order entry phase. The goods being delivered up to 300 klms away would need to be returned, and the correct replacements sent out at the cost of the distribution company. This process alone was costing them more than $250,000 not to mention the good will and reputation damage this issue was causing.

The solution to this particular problem was to design and implement a telephone operating system at a price of only 1% of the cost of the problem!

There have been many other instances where the price for the solution has exceeded the cost of the problem, in which case changing or integrating new software to cope with the problem was uneconomical. But bear in mind that a small issue today can grow and compound further down the track.

Needless to say, changing an accounting system is a daunting task. Not only will it cause disruption, but often you will find that the cost of this disruption is grossly understated. Change is always met with resistance from current employees. It means having to re-learn a new way of doing something which they are already familiar. Not to mention the thoughts of job security that are inevitable whenever you use the word "systems automation". And customers and suppliers will also make up their mind with their feet if your systems cause major problems with them dealing with you too.

In summary, identifying that you need a new system, or an integrated solution is the first step. Taking a full account of all your systems (or lack thereof) and procedures that are failing, not available to you with your current supplier or costing you money is the next step. Quantifying these by laying out the real cost of the problem areas should then be done. Then you will have a good basis to create a needs document and prioritize it quickly. Then your search for an appropriate solution can begin.

- Identify that you have a problem with your current accounting software system

- Take a full account of all your systems and procedures that could be improved or costing your money

- Quantify these problems so you know the real cost to your business. And don't forget to factor in the opportunity cost if it is relevant

- Use this as a guide to start writing out and prioritizing your needs of the replacement accounting software system

- Contact various vendors in search for a new accounting suite.