Best Practices for Deploying Microsoft Dynamics AX Opening Balances

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Best Practices for Deploying MicrosoftDynamics AX Opening Balances

byMohamed Aamer, Business Applications Consultant

published January 13, 2012

When a company migrates to Microsoft Dynamics AX from a legacy ERP solution, one

of the important data migration tasks is the creating opening balances in the new

Dynamics AX system based on the closing balances of the previous closed period (often

the fiscal year) from the legacy system.

In order to ensure accuracy in your Dynamics AX opening balances, it is important to

take a systematic approach to the process of planning, designing, and executing the

migration of data for trial balances and sub-ledgers, as well as validation and

reconciliation of these elements along with general ledger, sub ledger, and financial

dimensions. In this article I will lay out the process and the elements involved in

creating new opening balances in MS Dynamics AX coming from a legacy system.

The opening balances elements are:

Trial balanceThe trial balances (General ledger accounts) consist of the balance accounts

that move their balances from one year to another, and profit and loss accounts

which represent the income statement results and do not move to another year.

Sub ledgerThe sub ledgers are fixed assets, banks, vendors, customers, and items. The

sub ledgers are linked to the chart of accounts through the posting profile setup.

Validation and reconciliationThe balance of sub ledgers (fixed assets, banks, vendors, customers, and items)

must represent the balance of general ledger accounts (trial balance), with

respect to the financial dimensions (business units, department, and purpose)

balance in case it is used through sub modules. The controllership and financial

consultants should finalize and validate the design and deployment of financial

dimensions or the dimension hierarchy set.

Data integrity between the General ledger, sub ledger, and financial dimension is one of

the main objectives of Enterprise Resource Planning (ERP), and it must be considered

from day one of the opening balances since the opening balance transactions may

affect the daily transactions after going live.
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Opening Balances Best Practices

After various attempts to upload opening balances to Microsoft Dynamics AX, I havefollowed an approach where I have separated the upload of ledger accounts (trial

balance) and sub ledgers (vendors, Customers, Bank, Inventory, and Fixed Assets) by

using an Error Account in sub ledgers entries as debit and credit sides (Dr. Error

account, Cr. Error account) only to balance the sub ledger.

This approach took much time and effort in order to ensure that the GL account and sub

ledgers are reconciled, as well as to ensure the balance of Error account is zero. I have

worked with my team, and controllership to develop a series of best practices that

successfully guided us through the process:

Planning and design

1. The master data is prepared and uploaded into Microsoft Dynamics AX (chart ofaccounts, banks, fixed assets, financial dimensions, vendors, customers, and

inventory items )

2. Maintain high levels of coordination between the controllership and applicationfinancial consultants in the design phase, including finalization of mapping

between the old chart of accounts (legacy system) and the new chart of

accounts

3. Application financial consultants should ensure the setup of the needed fields inthe data collection template he/she will use to upload the opening balance.

4. The accountant who will fill in the opening balance data collection sheet mustunderstand the fields and how he/she will fill it in

5. Create a separate journal name under the general ledger journal and vouchernumber sequence for easier tracking

6. Create separate journal names under inventory management (movement journal)and voucher number sequence for easier tracking

7. If adjustments are needed for the opening balance, use the same journal nameand voucher


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8. The opening balances of general ledger and sub ledger are uploaded together.Avoid separating their uploads as much as you can

9. The sub ledger (vendors, and customers) posting profiles should be assigned toopening balance

Execution

The opening balance will be executed in three waves (Fixed assets acquisition and

depreciation, items, and trial balance with sub ledger). Here are the methods we utilized

to ensure correct execution.

Wave I Fixed assets

1. Fixed assets acquisition - The fixed assets acquisition will be executed through afixed assets acquisition proposal. The posting profile setup will generate the

following entry (Dr. Fixed assets accounts, Cr. Error account)

2. If there are fixed assets that are acquired in a foreign currency, modify theacquisition entry with the currency the exchange rate

3. Fixed assets depreciation - The fixed assets depreciation will be executedthrough a fixed assets depreciation proposal. The posting profile setup will

generate the following entry (Dr. Error account, Cr. Accumulated depreciation)

Wave II inventory items

Inventory opening balance will be uploaded from movement journal (inventory sub

ledger) the posting profile setup will generate the following entry (Dr. Inventory, Cr. Error

account)Wave III trial balance and sub ledger

1. Identify the GL account balances which are not affected by sub ledger postingprofiles

2. GL accounts that are affected by sub ledgers will be broken down by theirrelevant sub ledger (Banks, vendors, and customers) and the accounts will be

affected directly by the sub ledger posting profile

3. Make sure that the assigned posting profile is the proper posting profile for eachcustomer/vendor for two reasons. First, make sure the customer opening

balance hits the right account. Second, ensure that the entries occurred during

the settlement process (during year operations)

4. Replace the fixed assets accounts by an error account in order to close theamount in the error account which resulted from acquisition transactions

5. Replace depreciation account by error account in order to close the amount inthe error account which resulted from depreciation transactions

6. If there are balances in a foreign currency, upload the opening balance entrywith the currency the exchange rate

Validation


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1. Perform closing voucher to transfer all profit and loss balances to RetainedEarnings account

2. Print trial balance report with closing balance criteria

Documents

Best Practices for Deploying Microsoft Dynamics AX Opening Balances