I once joined an organization as its migration from QuickBooks to NetSuite was just being finalized. As the needs of our business grew and became more complex, so too did our need to migrate our financials to a more efficient, functional ERP. We were also looking to restructure the basic P&L view from very high level (i.e., revenue, COGS, direct and indirect expenses) to a detailed view (i.e., via cost centers) so that General Managers and VPs could take more accountability for the financial performance of their departments. For the month-end close and some of our transactional processes, we wanted a system that offered more flexibility and functionality.
The organization had acquired seven smaller business over several years. In terms of functionality and future system needs (specifically potential outputs and reporting), this needed to be thoroughly laid out to maximize the efficiency of NetSuite. Also, we wanted to ensure there would be an ROI through a combination of process improvements, which would create more transparency to see where we could leverage and/or reduce costs.
Based on that experience, let’s go over some recommendations for how you can successfully increase cost center transparency in your move from QuickBooks to NetSuite.
Before moving from QuickBooks to NetSuite, have a formal discussion with the C-level audience and key stakeholders about desired hierarchy and organizational structure.
We held recurring meetings with key company stakeholders and the CFO, CEO and VP of Operations to discuss what the new organization hierarchy structure would look like. The CEO decided that there would be seven revenue cost centers and six SG&A cost centers in NetSuite. He identified the names of each cost center and the cost center owners, and then we created unique cost center IDs in NetSuite per his direction.
The discussion with the C-level audience was important as the cost center owners and other C-level people live and die by the success of their business. Also, the salary and bonus structures of VPs and GMs per their prior-year performance were based on whether or not they achieved their minimum given goals and/or if they exceeded their goals.
For the business to scale, we needed to clearly outline the benefit of NetSuite’s functionality and how it would augment their future financial performance. It was made very clear to the C-level team that to migrate to NetSuite was a win/win for everyone.
Creating the cost center hierarchies in NetSuite eventually allowed us to see both revenue (KPIs) and all pertinent expenses in the newly modified data in NetSuite. This type of transparency was never visible in detail in QuickBooks. NetSuite, the new ERP, also would create more accountability in terms of tracking key KPIs and expenses by cost center.
Clean your data, test your setup and recognize that part of moving from QuickBooks to NetSuite will be sunsetting old habits.
The legacy QuickBooks data wasn’t properly scrubbed and did not contain cost center or product family hierarchies. The data needed to be cleansed as part of this migration process. Once the agreed-upon balances were achieved, the period ending balances were transferred from QuickBooks, and they became the beginning balances in NetSuite. In addition to the balance transfers, all vendors and customers were also moved over into NetSuite.
For the new chart of accounts (COA) developed, we had to ensure both QuickBooks balance sheet accounts as well as QuickBooks P&L accounts were properly mapped (reconciled) into NetSuite and that nothing was missed. We also had to create new unique account descriptions and account strings and vendor/customer IDs to ensure no duplicates were being captured or created.
The income statements and balance sheets in QuickBooks were standard, consolidated (i.e., total company), high-level P&Ls. We had to align each part of these financial statements into NetSuite and assign a project manager from the accounting team to oversee the technical aspect of this process. We had 12 global subsidiaries (entities) that were part of our global consolidation, so we had to ensure that each subsidiary was correctly migrated into NetSuite and that these subsidiaries also a part of our final global consolidation. A full test was required once this was set up in order to ensure all entities were rolling in correctly in both local currency and USD.
It’s important to note that the cleaning and restructuring of data involved the understanding that YOY balance would not be apples-to-apples analysis. As noted earlier, we wanted to show these financials at the cost-center level for further transparency. The QuickBooks data was not structured by cost center or product family, which made YOY balance analysis complicated in terms of organic comparisons vs. the data in NetSuite. Additionally, legacy vendor and customer info was also structured differently.
Accounts Receivable (i.e., customer name) and Accounts Payable (i.e., vendor name) needed to be sorted through and cleansed to prepare for testing and streamlining in the new environment. All vendor names and customer names had to be consistent, with no duplicates or variations of the names.
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You cannot overestimate change management, training and the magnitude of the mind shift in moving from QuickBooks to NetSuite.
A huge pitfall in my experience was that the accounting team wasn’t keen on change, and they weren’t properly trained for this seismic shift. Properly coding recurring and non-recurring journal entries and invoices in Accounts Payable to a new chart of accounts with a new accounting string was something that wasn’t fully explained to the accounting staff. The lack of proper, prior training on how to code journal entries and invoices ended up creating more work for higher-level accountants to reclassify items. It also creates variances for FP&A professionals trying to analyze month-end actuals against budget.
This meant more training after the fact. At the origination of journal entries (JEs) for month-end close, all accountants were trained on how to:
- Code properly per the new chart of accounts,
- Use the correct cost center account string, and
- Add a consistent brief description of the JE as a reference line.
This training not only improved our data as it was inputted in the system, it also helped in the timing schedule given for month-end close. We were able to shorten the close window from 60 days post-close to 45 days.
The redesign of our financials, both balance sheet and income statement, were in the standard format of NetSuite reports. These reports allowed the ability to drill down.
In our Excel-based Global Revenue file (KPI tracker) we layered in the new cost center names and product family categories into the data. We had three main lines of business that these KPIs were captured under, so this info also had to be layered in as well.
Training for FP&A team members is also important due to the various reports that NetSuite has the functionality to create. It’s quite useful for an FP&A person to figure out how to pull a report together, either at the cost-center or line-item level (e.g., revenue, OpEx, etc.) for proper month-end analysis against budget and forecast. One can certainly be creative in NetSuite in developing, from scratch, a report with all of the things you want to see. For example, I created a new NetSuite report that was at the cost-center level, and the process involved creating columns and aligning data rows correctly to successfully develop this FP&A income statement.
The mind shift that needed to occur for the Finance and Accounting teams one of immersion, training and testing. We needed to fully be trained and acquainted with relevant NetSuite features and capabilities, and we needed to be empowered to try novel approaches. If we didn’t immerse ourselves fully into leveraging NetSuite as its own system—and instead tried to make it operate like QuickBooks—the migration effort wouldn’t have fully served its purpose.
Even the cost center owners had to immerse themselves into NetSuite to understand how to approve Purchase Orders, create and approve invoices, track time and get the most out of the newer workflows in NetSuite.
All other employees, such as those in R&D and SaaS cost centers, needed to get acquainted with the timekeeping system and ensure their billed time was correctly allocated to the right projects. They also had to learn how to make sure that they were billing their time correctly to respective cost centers.
Give your team a realistic timeline, appropriate resources and time to test.
We acknowledged early that our in-house team did not have the bandwidth to handle their day-to-day duties and take on implementation tasks. We hired a third-party NetSuite implementation team to assist us with identifying the inefficiencies or the limitations of our processes in QuickBooks. That helped us to determine what could be improved in our move to NetSuite. Many system implementations can be halted by not having enough resources to carry various tasks through, but our NetSuite consultants helped speed up the sandbox testing process along at this stage.
At this stage, we made sure every possible transaction scenario was tested in our sandbox prior to any possible modifications, and our NetSuite consultants were on hand for any issues we encountered.
We met on a weekly basis with the NetSuite consultant team, and we created a timeline with various tasks assigned to different consultants. It was important to have this status meeting to know if there are any hiccups that would prevent us from not achieving certain milestones in our timeline.
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Empower users through project setup training, workflows and appropriate permissions in NetSuite.
In terms of Accounts Payable (AP), we utilized Concur, which directly interfaced via cost center with NetSuite so that various reimbursements for employees would be appropriately paid with their payroll. We sought to make the AP transition as seamless as possible by automating our Procure-to-Pay process with all appropriate controls in place. Our AP Manager played a big role in leading this process with the NetSuite consultants.
For Accounts Receivable, we sought to ensure customer invoices were automatically generated once a project was completed in NetSuite. Once a project was marked as complete, it would act as a trigger in NetSuite to create an invoice. We also double-confirmed all net payment terms with our customers to be sure NetSuite reflected the same net terms and that our AR balances did not go into past-due status.
When creating a project or SOW in NetSuite, it was important that the setup was 100% accurate from the start; otherwise, it would cause problems later. Employee project setup training is a must to sure proper revenue recognition and that billing/invoicing is flowing through the correct business line and cost center.
We assigned only two or three people as superusers of NetSuite. The rest of the employees (e.g., cost center owners) in other departments such as Legal, HR, Marketing and IT were considered regular users. These superusers (i.e., Controller, Director of Systems, CFO) had full permissions and could also grant or deny certain types of access to various users across the organization. (The superusers would only grant certain access if there was a business need and proper managerial approval.)
We designed PO process workflows in NetSuite at the cost-center level, so that only cost center owners had the ability to approve their own POs. Each cost center owner was assigned as an “approver” of POs for their respective cost center and was able to create POs and customer invoices. Certain direct reports to cost center owners, depending on their level, were also assigned advanced permissions to create POs and customer invoices. The spend threshold was limited for the cost center owners, and if the threshold amount was considered high, approvals would need to be automatically routed to the CFO, and in some cases, the CEO.
Stay tuned for part two, in which we’ll explore recommendations for enhancing budgeting, reporting and forecasting after your QuickBooks to NetSuite migration. You can also subscribe to CFO Insights to receive email notifications when our team publishes new articles.
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About the Author
Isaac is a finance professional with more than 15 years of experience in a wide range of industries including commercial real estate, retail and entertainment. He has held roles in a variety of organizations from smaller startups to larger Fortune-500 companies including Sony Corp of America, Elevate Services, CBRE, Johnson Controls, Mattel, Levi Strauss & Co. and others. As a manager, he has played an integral role in overseeing month-end close process as well as annual budgeting and quarterly forecasting processes. He has extensive financial modeling experience and has participated in various system implementations. Isaac also has supported various M&As and post-merger integration work including the financial reporting of multiple smaller global entities into one consolidated global view. Isaac holds a B.S. in Economics from UCLA.