Once you’ve identified the “must-have” data, it’s important to consider what is feasible from a technical perspective and devise a plan that ensures business continuity.
Congratulations! Your firm has decided to move to a new legal practice management, billing or accounting platform. You have gone through the analysis, made a selection, and now comes the big question – What data should be brought over to the new application?
To start, think about how far back you need matter, contact and related matter information, and how this data will be used. Once you’ve identified the “must-have” data, it’s important to consider what is feasible from a technical perspective and devise a plan that ensures business continuity.
Understanding Your Starting Point: On-Premise Software vs. Cloud Application
If your firm is using on-premise server-based software (often referred to as a legacy application), you may be able to maintain access to your data after you’ve made the move by migrating the program from the server to a single, secured workstation through which you can access the history. If it is a desktop subscription, check with the vendor. Failure to renew the subscription may prevent you from accessing the latest version of the software or make the database read-only, reporting allowed. Be sure to keep your contract until the data is moved and you have verified access.
If you are coming from cloud-based software, the ease of your data migration will depend in part on your current vendor. You might consider going to a single-user license for a period of time to maintain availability during the transition. (This may not be an option for all service providers, so be sure to ask the right questions before making any decisions.)
Regardless of whether your current software is cloud or server-based, most providers will allow you to extract data to excel spreadsheets or create reports that can be saved in PDF format. Prior to conversion, get sample reports and look at the data to make sure you have the pieces you need. The best way to extract data would be through back-end access to the legacy application’s database. In that case, a qualified consultant or the new vendor might be able to extract the data in ways that provide better information than the default method of relying on data exported into spreadsheets.
Your Data Checklist
As you map out your move, consider the following data points and whether you need all information moved to the new system:
- Contacts (and related custom fields)
- Calendar
- Practice Areas
- Matter Data:
- Custom Fields
- Contact Roles
- User Rates
- Notes
- Phone Call Notes
- Emails
- Tasks
- Documents
- Financial Data
- Unbilled Time Entries
- Unbilled Expenses
- Unpaid Client Invoices
- Chart of Accounts
- Trust Balances
- Accounts Receivable
In my experience, migration of financial data often gives firms the greatest pause when it comes to transitioning to a new platform. With the right plan in place and a team of experts handling the move, however, financial data migration can be done with minimal disruption to your firm’s operation.
Financial Data Migration: The Basics
At a minimum, you will want to migrate financial information for all current matters including AR and trust balance and unbilled time and expenses.
Historical data isn’t quite as black and white, and the history you need brought over largely depends on what type of access you can keep to your old system and how you use the information. The level of detail at which you need the information is important to consider. Accounts Receivable can be a lump sum, broken down by fees, costs, interest and taxes, or broken down based on who did the work. The more detailed you need the information to be, the more expensive it will be to migrate; however, it’s worth paying for.
With the right plan in place and a team of experts handling the move, however, financial data migration can be done with minimal disruption to your firm’s operation.
What Makes Sense for Your Firm?
To determine what historical financial data is needed, think about your firm’s compensation model. If compensation is based on collections on billed time and you do not have the details available in your new system when the bill is paid, how will you do the calculations? The volume and level of detail needed may allow for calculation in spreadsheets, but you want to know this in advance and make the decision that is right for your firm. Once data is converted, making changes to the converted data is usually very difficult.
Next, think about the balance sheet and the income statement. What reports does your firm run on a regular basis? If you run year to year comparative income statements monthly, you will have different considerations than a firm that runs comparisons once a year.
Timing the Migration
Most often, firms bring in beginning balances from the start of a year. However, it’s not always possible to start at the beginning of a year, so the beginning of a month should be the target. It may be possible to migrate billing and matter information while holding off on accounting conversion until the fiscal year; however, this may cause additional complications if you are using tightly integrated systems. The benefit of a full year of finance data in one place is traded-off against double entry and reconciliation of the two systems at a later date.
When using the balance-forward approach, history is saved in the old system or PDF/Excel reports. This is the simplest and least expensive way to start up and, depending on the export and import capabilities of the old and new systems, it may be the most feasible without a lot of manual entry. When choosing this method mid-year, remember that you will need to go back to your old system for transaction details for the first part of the year. You will also have to look back to the old system for vendor amounts for 1099s at year end. If your programs do the payroll calculations, you will also need to make sure the new program has all the information to properly calculate salary withholdings and tax payments, as well as W2s at year end. Using a payroll service makes this process much simpler.
If you need to be able to run comparative reports, you don’t necessarily need every transaction. You may be able to put in yearly, monthly or quarterly journal entries so that each period end has correct numbers but the details remain in the old program.
Balances & Reconciliation
When entering balances in your new legal accounting software, you need to make sure you can do your bank reconciliations and that your numbers are accurate. If you have not been doing a three-way trust reconciliation, make sure your trust balance by client matches the bank account balance, and that the trust bank account and trust liability account match before migration.
WPro Tip: This is also a good time to decide how to handle any stale, uncleared checks. Generally, any check older than six months is considered stale and cannot be cashed. How it should be handled depends on whether it is a check from trust or operating. For operating checks, work with your accountant to decide how to handle and take care of them before you convert. For trust checks, follow your state bar rules. Additionally, you don’t want to take bad data out of the old program and put it into the new one, so find the issues and clean them up before you move the data.
In mapping out your financial migration project, choose your cutover date early on. It is best if it is the end of a defined period, like a month. You should plan to enter the trial balance as of that date with the exception of Accounts Payable, Accounts Receivable, Trust, and Bank Accounts. Accounts Receivable and Accounts Payable will have to be brought in or entered with appropriate detail so you will want the transactions. Accounts Receivable will most likely be brought in as part of your billing migration. The same is true for Trust where you will want to make sure to bring in the trust balance by client. For all bank accounts, you should be bringing in the bank statement balance as of the cutover date, and then entering uncleared checks and deposits. Doing this will allow you to do bank reconciliation in the new software most easily. You may also want to look at how you can bring in unpaid hard costs if these need to be reconciled by client.
You Have Options
While it can seem overwhelming at the start, your firm likely has several options when it comes to maintaining access to your financial data — both current and historical. For most firms, printing historical reports to PDFs and saving them, or maintaining a copy of your old program on a single computer and bringing over balances, is a reasonable approach. You should work with your accountant to understand bar association requirements and work with a trusted consultant to determine the best balance of cost and accessibility to meet your reporting needs.
Written by CARET Legal partner, Caren Schwartz. Caren has been serving the technology needs of the legal industry for almost 30 years and leads the accounting services team at 3545 Consulting – Global. Caren’s key focus is back office services, analytics and best practices for law firms. Caren is the author of QuickBooks for Law Firms.
