Financial data migration in ERP

July 26, 2021

The purpose of this blog is to outline an approach for financial data migration from a legacy system to a cloud based ERP.

Financial data migration from a legacy system to a cloud based ERP system can be quite challenging.
There are two approaches and both are acceptable from an audit standpoint based on preferences of the audit partner(s).

  • Transaction level migration
  • Summary level migration

Transaction level migration

In this approach, detailed transactions from the legacy system are mapped to journal entries in the new system. Every entry in the legacy system becomes a journal entry in the new system. Depending on the volume of data being migrated a decision is made to have a separate database instance with all legacy data loaded and keep the live system on a separate database instance OR to keep all the data in the same database instance.

  • Pre-requisites
    • Audited trial balances of all fiscal years being migrated.
    • Invoice wise transaction of Debtors, Creditors and their corresponding payments.
    • Inventory and other Asset balances like bank etc.
    • Shareholders Equity details.
    • Masters like Customers, Suppliers, Items.
    • Cost center, Project and other dimensional mapping to source legacy system transactions (In case reporting is needed at that level post migration)

  • Methodology
    • Each and every transaction needed from prior fiscal year(s) is migrated via Journal Entries in the new system.
    • Invoice wise transaction of Debtors, Creditors and their corresponding payments.
    • Matching between payments and invoices is carried out for each year.
    • Opening and closing inventory is loaded for each year.
    • Trial balances of each year are matched with loaded data before migrating the next year. This done till the current year.

A sample journal entry from a transaction level migration migration could look something like below


Summary level migration

In this approach, account level balances are migrated for each fiscal year via opening journal entries. Detailed transactions are not migrated.

  • Pre-requisites
    • Audited trial balances of all fiscal years being migrated.
    • Invoice wise transaction of Debtors, Creditors and their corresponding payments for the current year. (In case migration is mid-year)
    • Inventory and other Asset balances like bank etc.
    • Shareholders Equity details.
    • Masters like Customers, Suppliers, Items.

  • Methodology
    • Account level balances needed from prior fiscal year(s) is migrated via Journal Entries in the new system.
    • Invoice wise transaction of Debtors, Creditors and their corresponding payments are migrated for current year.
    • Matching between payments and invoices is carried out for current year.
    • Opening and closing inventory is loaded for each year.
    • Trial balances of each year are matched with loaded data before migrating the next year. This done till the current year.

A sample journal entry from summary level migration could look something like below


Both the approaches have pros and cons but the summary balances approaches is faster to go-live and most recommended. Transaction level approach can increase the cost of an ERP implementation project substantially if not estimated for in the initial go-live plan.

In case you have any queries or need help with consulting for data migration from legacy systems to your new ERP system, do write in to us at hello@openetech.com.

Pawan Mehta
Pawan Mehta

Pawan is an independent consultant who helps medium sized companies implement ERPNext and BI solutions. During his free time he likes to jog, play carrom and spend time with his family.

1 comment
Rajesh August 9, 2021

Very crisp summary...

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