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Mastering Financial Cutover Strategy for D365 Finance & Operations

10 September 20223 min read
Dynamics 365Data MigrationFinancial CutoverGeneral LedgerERP Implementation

This post outlines a comprehensive financial cutover strategy for migrating from a legacy system to Microsoft D365 F&O.

A successful transition relies on a meticulously tested plan that replicates real-world conditions, including a precise financial tie-out of all accounts. To maintain data integrity, the sub-ledger totals must perfectly align with the general ledger control accounts at the moment of the switch.

There are two primary technical methods for preventing duplicate entries: using clearing accounts or temporary manual entries to control accounts. While the focus is on loading ending balances and open transactions, historical data can be accommodated through monthly delta loads.

Ultimately, we should try to avoid migrating detailed historical records and instead recommend that businesses retain their legacy databases for future reporting needs.

Why Avoid Migrating Historical Transactional Data?

Migrating historical transactional data is considered extremely complex and costly. Due to these risks, it is not recommended to attempt converting historical transactions when moving to a new system like D365 F&O. The recommended alternatives are:

  • Focus on essential data: Limit data conversion to master data, summary balances, and the open transactions required to support ongoing operations.
  • Maintain legacy systems: Keep the legacy transaction database accessible for future reporting and compliance purposes rather than moving the data into the new system.
  • Use monthly deltas for reporting: If historical data is needed for comparative reporting, a safer approach is to load a trial balance from a past date and then load monthly deltas (the changes in account balances) up to the cutover date.

By focusing on summary balances and open sub-ledger transactions that tie to the control accounts, organisations can ensure a successful financial tie-out without the risks associated with migrating detailed historical records.

Essential Steps to Execute a Financial Cutover

To execute a successful financial cutover, you must first develop a comprehensive cutover plan that lists all required tasks, their dependencies, and durations. This plan should be tested several times prior to the actual go-live date using a real financial cutover date to ensure a proper financial tie-out can be achieved.

The essential execution steps include:

  • Restricting legacy access: Once the cutover begins, all activity in the legacy system must stop and access should be restricted to prevent further changes.

  • Loading ending balances: The ending financial balances (trial balance) from the legacy system must be loaded into the new system. If historical comparative reporting is required, you may load a trial balance from a point in the past followed by monthly deltas representing account changes up to the cutover date.

  • Loading open sub-ledger transactions: Alongside the trial balance, you must load all open transactions for each sub-ledger as of the cutover date. It is critical that the totals for these sub-ledger files match the corresponding control accounts in the trial balance.

  • Managing control account duplication: To prevent doubling balances when loading both the general ledger and sub-ledgers, you must choose one of two strategies:

    • Clearing account approach: Map the control accounts from the trial balance to a clearing account and set the offset for sub-ledger transactions to that same clearing account so they net out.
    • Control account approach: Temporarily uncheck the "Do not allow manual entry" flag on control accounts and use the control account itself as the offset for the sub-ledger transactions.

  • Final validation and tie-out: The final step is to verify that the ending trial balance in the new system matches the legacy system exactly and that all sub-ledger totals align with the general ledger control accounts. If clearing accounts were used, their balances should net to zero.

Conclusion

To minimise complexity and cost, the cutover should focus strictly on master data, summary balances, and open transactions rather than attempting to migrate historical transactional data. Retaining the legacy system for historical reporting and compliance is a far safer and more cost-effective approach.

More information can be found the Microsoft Learn sources