In this guide · 8 sections
Short answer
The conversion date is the day your new software takes over, usually the first day of a month or financial year. Opening balances are what every account held at the end of the day before: bank, receivables, payables, loans and equity. They come from your accountant's trial balance at that date.
What a conversion date is
The conversion date is the day your new accounting software becomes the place where you record transactions. Xero's help article on setting your conversion date says it is the date of your opening account balances, usually the date you start using Xero, and that a conversion date is always the first of a month. Xero's guide to converting from any system adds that it is not necessarily the day you sign up.
Other software uses different names for the same idea. Zoho Books calls it the opening balance date or migration date, and QuickBooks Online asks for a start date when you set up each bank or credit card account.
| Software | Term used | Where it is set |
|---|---|---|
| Xero | Conversion date and conversion balances | Accounting settings, Conversion balances |
| QuickBooks Online | Opening balance and start date per account | When creating each account, or by journal entry |
| Zoho Books | Opening balance date (migration date) | Settings, Opening Balances |
What opening balances are
Opening balances are a snapshot of your business at the moment you switch. Xero's article on the accounting behind conversion balances describes them as the closing balances from your previous accounting system, spreadsheet or other records as at the last day you used it. Zoho Books gives the same rule: if you migrate on 1 January, the opening balance is the closing balance as at 31 December in the old software.
In practice the list usually covers:
- Bank accounts, cards and cash, matching the statements on that date.
- Accounts receivable (what customers owe) and accounts payable (what you owe suppliers).
- Fixed assets and accumulated depreciation.
- Loans, director's accounts and GST payable or receivable.
- Equity: share capital and retained earnings.
- If you switch mid-year, year-to-date income and expenses, so the year's profit and loss is complete.
QuickBooks Online puts it simply for bank accounts: the opening balance is the amount in the real account on the day you start tracking it, and QuickBooks posts the other side to an automatic Opening Balance Equity account.
Choosing a conversion date
The best conversion date is one where your accountant already has a clean set of numbers. That usually means the start of a financial year or, failing that, the start of a quarter or month that has been closed and reconciled.
Start of financial year
Simplest- Opening balances are only balance sheet accounts
- Matches the last set of year-end accounts
- Clean comparison year to year
Best for: Businesses that can wait for year-end, or have just closed it.
Start of a month mid-year
- Needs year-to-date income and expense balances too
- Trial balance must be prepared as at that month-end
- GST periods should line up
Best for: Businesses that need to switch now and have reconciled books to a month-end.
Why your accountant supplies the numbers
Opening balances are accounting figures, not exports. A bank balance is easy to read off a statement, but receivables, accruals, depreciation and retained earnings depend on adjustments your accountant made at the last close. Xero's conversion balances help says to enter balances from the trial balance dated the day before your conversion date, for example a 31 December trial balance for a January conversion.
Ask your accountant for three things: a trial balance as at the day before the conversion date, an aged receivables list and an aged payables list on the same date. The totals of the aged lists should equal the receivables and payables lines in the trial balance. If they do not, find out why before anything is entered.
How opening balances go in, step by step
The order matters, because invoices and bills you enter can change the control account balances. This is the usual sequence in Xero; QuickBooks and Zoho Books follow the same logic.
Set the conversion date
Choose the month and year in the new software before entering anything.
Enter unpaid invoices and bills individually
Xero's guide to entering unpaid invoices and bills has you add each one with its original date and number, so you can chase, pay and reconcile them later.
Enter the trial balance figures
Key in or import the remaining balances from the accountant's trial balance. Receivables and payables should now agree with the invoices and bills you entered.
Check debits equal credits
If they do not, Xero posts the difference to a historical adjustment account. A balance there means something is missing or mistyped.
Compare reports with the old system
Run the balance sheet as at the day before the conversion date in both systems. They should match line by line.
Common opening balance mismatches
Most clean-up work after a migration traces back to one of these:
| Symptom | Usual cause |
|---|---|
| First bank reconciliation will not balance | Opening bank balance taken from a different date, or uncleared cheques and deposits ignored |
| Receivables total differs from the aged list | Invoices entered as well as a lump-sum receivables balance, so they count twice |
| Balance in historical adjustment or Opening Balance Equity | A trial balance line missing or mistyped, or a debit entered as a credit |
| Profit for the year looks wrong | Mid-year switch without year-to-date income and expense balances |
| GST return does not match | Conversion date in the middle of a GST period |
| Stock value missing | Inventory items imported without opening quantities and costs |
If you are moving from spreadsheets, our Excel to Xero migration guide covers preparing the data. If you have not chosen software yet, compare Xero and QuickBooks in Singapore first.
Do it yourself or get help?
If your accountant hands you a clean trial balance and aged lists, a small business can enter opening balances itself in an afternoon. It becomes a project when there are many open invoices, several currencies, stock, or old books that have never been reconciled.
Before you start using the new books
IT Sorted is a Singapore-based team of developers with over 10 years of experience. Our Accounting Migration (S$690) agrees a written plan and cut-over date with you and your accountant, imports customers, suppliers and products (up to 500 records), brings across up to 200 open invoices and bills, enters opening balances from the trial balance your accountant gives us, and checks totals against the old system in a short report. Your accountant keeps the books; we set up the software.
Frequently asked questions
It is the date your opening balances apply from, usually the day you start recording transactions in Xero. Xero says a conversion date is always the first day of a month and is not necessarily the day you signed up. The only transactions dated before it should be invoices and bills that were still unpaid when you converted.
From your previous accounting records as at the day before the conversion date, normally your accountant's trial balance for that date, plus aged lists of unpaid customer invoices and supplier bills. Bank balances should match the bank statements on the same date. Do not estimate them, because every later report builds on these figures.
It is the simplest option, because only balance sheet accounts need opening balances and the figures match your last year-end accounts. Switching mid-year works too, but you also need year-to-date income and expense balances from a trial balance at the month-end before the switch, and the GST period should line up.
It is an account QuickBooks Online uses automatically for the other side of opening balances you enter, such as a starting bank balance. Once all opening balances are in, it should normally be cleared to zero, with the amount moved to the correct equity accounts such as retained earnings. A leftover balance usually means something is missing.
Usually because the opening bank balance was taken from the wrong date or did not account for items that had not cleared the bank yet, such as uncleared cheques or deposits in transit. Compare the opening balance with the bank statement on the day before the conversion date and enter any uncleared items separately.