How Do I Convert My MSP’s QuickBooks Desktop File to QuickBooks Online?

2020 was just the push your organization needed to take the jump.  

Maybe it was the friction of trying to get users into the file while working remotely during the pandemic.  

Maybe the QuickBooks Desktop company file is the last desktop software hosted on a local server in the company.  Or maybe, QuickBooks Online is mature enough to support your organization and your company is confident you can make it work with cloud technology.  Whatever your reason, it is time to make it work and finally convert your existing QuickBooks file from the desktop to the cloud.

You have been dreading this for good reason.

You have done this before; software migration and accounting file changes.  It is important to know the reason you have not already converted is you have experience with this, and it is painful.  

The long hours and late nights of checking and rechecking the files, reconciling bank accounts, and making all the journal entries to make sure everything transferred correctly is something few enjoy.  

The trepidation you feel is justified.

Payroll still needs to be paid and recorded.  Invoices still need to be sent and payments received in the midst of the migration.  And bank reconciliations don’t just happen by themselves. 

In addition to the normal steps the average desktop user has, MSPs generally use a PSA for their time and expense tracking, billing, ticketing, and CRM system.  If you are using Autotask, ConnectWise or another PSA to integrate into the QuickBooks file, that connection will need to be removed and reattached to the new file oftentimes requiring a connecting software solution.

Creating a plan to manage the migration project is the most important step.

It is not in your nature to shoot from the hip and your company is relying on you.  Create and follow a detailed migration plan to pull this off with minimal pain and frustration.  Managing this flawlessly will make you a hero in the end.  This will make your life easier on the other side.

Invest time and effort to learn QuickBooks Online.

You don’t have to know everything about QBO, but the basics are necessary.  I frequently say the only similarities between the desktop and the online version are the logo.  QBO is a native cloud software and functions very differently than the desktop version.  (I have written about some of the changes here.)  While most non-accountants love the changes, anecdotally, I hear the most complaints from accountants who have grown up using the desktop version.  

Whereas the desktop version allows multiple ways to accomplish tasks, QBO functions like a cattle chute, limiting the user to one way of accomplishing any given task.  The reports are very different and allow for extensive customizing.  Unlike the desktop version which has dozens of preset reports, QBO provides far fewer but allows for modifications and sharing between companies.  The differences are so many that a solid training course in QBO will be a great investment to jump-start the migration.  

Research other software you need after the migration.

As mentioned before, the software to connect to QuickBooks Desktop is not the same for QBO.  How are you going to integrate QBO to ConnectWise?  (Here’s a post on three common options.)  The level of integration, billing, and inventory management will determine the software you choose.  Make a list of the software available and required to integrate.  

As accountants, we tend to marry our software.  We stand at the proverbial altar and pledge our undying devotion to the current and future versions of that software.  Since that is generally the case, get to know the character of the software company.  Divorcing your software is painful and expensive.  Choose software companies that have great reputations and great service. 

While automating accounts payable and accounts receivable is beyond the scope of this post, these are high-return investments that will make your life easier and the company more profitable.  Ensure you have the ability to make these future modifications with ease in your software.

Determine your team’s capacity to manage this project.

If your company is like most, the accounting “department” is running a little thin.  (The “department” is sometimes only a part-time employee.)  Add to that the tight labor market and the multiple hats accounting is wearing, and it is easy to see why no one has done this before!  

Is there anyone on the “bench”? 

Is there any slack in the current human resources? 

Do you need outside capacity?  

The faster the project is completed, the less painful it will be.  While no one wants to invest more than needed, a successful project will make you look like a hero long after the P&L is forgotten.

Schedule a date to migrate the data.

Accountants may not love deadlines but everything we do is determined by one.  Choose a date when your team has the capacity to do the migration.  Later in the month is generally a slower time for accounting departments.  

Block the calendar for the week.  Avoid as many meetings as possible and, if needed, notify your family or significant other that you may be busier than normal and need to hit a “home run” with this project.

Invest your time cleaning up your existing QuickBooks Desktop file.

Everyone’s attic gets cobwebs and dust balls and the same is true of accounting files.  

Do you need all those classes or can you reduce them to make the file more manageable?  

How many items are you currently using?  Download a list or get rid of old, unnecessary items 

Update the file by navigating to Help > Update QuickBooks > Update Now.  If your version is out of date and too old to receive updates, Intuit allows you to upgrade your version to a trial desktop version so you can convert to QBO.  Ensure the errors are gone, payroll liabilities are correct and old, uncleared transactions in the checking account are voided or reversed and reconciled.  

Sign up for a QuickBooks Online account.

There are multiple versions of their online version.  Depending on the number of classes and items, Intuit may force users into QuickBooks Online Advanced which is currently their online version for Enterprise users.  

Detach your current integrations from your QuickBooks Desktop file.

You are getting closer to your goal and this step moves you from theory to practice.  “Unplug” the PSA integration, quoting applications, payroll applications, accounts payable, and any other applications currently integrated into your desktop file.  Pause all functions that would cause data to flow between applications during migration.

Import your desktop file to QuickBooks Online.

Signed in as the administrator, navigate to “Company” and select “Export Company File to QuickBooks Online”.  This summons the genie that will walk you through the migration process.  This process may take around 30 minutes depending on the file.  Generally, it only takes a few minutes to convert.

Pull out your magnifying glass and make sure everything matches.

From the old to the new, everything has to match.  Print and compare financial reports (accrual basis) in both systems.  From AP, AR, trial balance through the items, classes, and locations, verify everything is intact.  (Note: if there is an “Opening Balance Equity” balance, something is off.)

Bear in mind, there are different category names.  Intuit prepared a helpful list of the differences between the versions.  

Reconcile all your accounts as of the last reconciliation date.

The reconciliations previously in desktop will not convert to QBO.  The easiest way to update this is to follow along with the prior desktop reconciliations.  

Review the chart of accounts to ensure they are coded correctly.

The account listing functions differently in QBO.  It is not drastically different, but it will appear different.  Check to make sure all the accounts are categorized as they need to be.  (This will cause some accounts to be in a different order than before.  Be prepared for the financial statements to look different printed from the online version.)

If you are using sales tax in QuickBooks, set up your sales tax locations before invoicing.  

Sales tax will not convert for all transactions.  Some will convert only as journal entries.  This is critical to have this set up before invoicing anyone.

Connect the bank feeds for all checking, savings, and credit card accounts.

Bank feeds are the most compelling feature of cloud accounting.  This may be the single best time-saving function of QBO.  Be sure to set these up.  

Link all accounts and update them daily.  

Check vendors, customers, and any accounts and merge duplicates.

Cleaning up duplicates in QBO is really easy.  Make sure you have the correct information and clean up any duplicates.

Pause for a moment and consider what you have accomplished.

At this point, your company now has a complete file in QuickBooks Online.  The information is correct and you should be able to invoice.  The steps after this are to link your new shiny, cloud-based QBO file to your PSA.  

It is important to know that Intuit recommends running the old system side-by-side with the new for a couple months.  This will not work for MSPs with a connected PSA.  The integrations (PSA, AP…) can only be completed to one QuickBooks file at a time and severely impacts the ability to duplicate all information in both systems.  Know this is the reality of a fully integrated accounting system.

Setup the integration between your PSA and QBO.  

This will take a variety of steps but will get you integrated again with the new system.  Likely there is a software vendor assisting you with the integration.  At the end of this step, your vendor should be able to prove the integration is functioning and there is two-way communication.  

You are now up and running and have successfully completed the migration.

Don’t stop here; there’s a world of applications to make managing easier.

Cloud accounting is about third-party applications just like the PSA marketplace.  Quoting, AP, AR and credit card management are just a few investments that will now integrate with QBO and/or your PSA.  Spend time learning the most popular QBO applications so you can better manage your company.

This is a major undertaking and needs to be planned accordingly.

While this may sound like installing a Darnett Disposable Toilet, in no way is this a quick fix.  

This is a major project with real implications to capacity, morale, and bottom-line profitability.  Considering the potential risks to the business and your personal stress, the stakes are high.  

Plan out your project, know your inputs, take your time with this and do it right.  Pretty soon, you’ll be wearing a cape around the office!