Before You Start

This guide assumes you have a newly migrated Xero file with initial reconciliation history, and access to the previous system’s trial balance. It’s designed for bookkeepers and accountants performing Xero setup.

Overview

35 min
Cleanup Time
Advanced
Difficulty
As Needed
Frequency

What You’ll Learn

  • How to identify the ‘Conversion Balances Discrepancy’
  • Methods for correcting incorrect opening balances
  • Reconciling bank and control accounts at conversion
  • Finalizing and locking the conversion balance sheet

1. Essential Data Points

Before making any adjustments, gather these crucial documents and data:

Required for Accuracy

  • Trial Balance from your previous system (as of conversion date)
  • Detailed Bank Reconciliations (as of conversion date)
  • Aged Payables and Receivables reports (as of conversion date)
  • Conversion Date (the date you start using Xero for transactions)

Helpful for Complex Migrations

  • Fixed Asset Register
  • Inventory Valuation Report
  • Payroll Liability Reports

2. Understanding the Conversion Balance

The Conversion Balance in Xero is your opening balance sheet. It’s crucial for accurate reporting going forward.

Scenario A: Perfect Migration (Rare)

This happens when all opening balances import correctly and sum to zero.

Pros:
  • No manual adjustments needed.
  • Immediate reconciliation.
  • Clean start.
Cons:
  • Seldom occurs in practice.
  • Assumes perfect source data.

Scenario B: Requires Adjustment (Common)

More often, the imported balances don’t perfectly balance, requiring manual intervention.

Expert Tip: The goal is for the “Conversion Balances Discrepancy” account to be zero after all adjustments. If this account holds a balance, your balance sheet is incorrect, and future reconciliations will be difficult. Address it head-on for a solid foundation in Xero.

3. Step-by-Step: Adjusting the Conversion Balance

Here is the high-level workflow for clearing the conversion balance discrepancy.

Your primary objective is to make sure your opening balances in Xero match your trial balance from the previous system exactly, for every account.

Here is a sample code block to show how an API call might look for importing balances.

{
  "account_code": "001",
  "account_name": "Bank Account",
  "conversion_date": "2025-01-01",
  "debit_balance": 15000.00,
  "credit_balance": 0.00
}

4. Key Adjustment Areas

  1. 1

    Review the Trial Balance

    Compare Xero’s conversion balances against your source system’s trial balance. Identify every discrepancy, no matter how small.

  2. 2

    Fix Bank Account Balances

    Ensure your bank accounts in Xero exactly match your bank statements as of the conversion date. Any unpresented items from prior periods should be manually entered as bank statement lines.

  3. 3

    Adjust A/R and A/P

    Verify that individual customer invoices and supplier bills (and their total sums) correctly reflect your aged reports from the old system. Adjustments here directly impact customer/supplier statements.

  4. 4

    Correct Other Balances

    Address any discrepancies in inventory, fixed assets, loans, or other liability accounts. Use manual journals for non-bank, non-A/R, and non-A/P accounts to correct amounts, balancing against the ‘Conversion Balances Discrepancy’ account.

Common Error: Unbalanced Entries

When making manual adjustments, always ensure your journal entries balance. Incorrectly balanced entries will simply shift the ‘Conversion Balances Discrepancy’ error rather than resolve it. Every adjustment should directly clear a specific difference identified in your comparative trial balance.

5. Testing Your Setup

Final Verification Checklist

  • Confirm ‘Conversion Balances Discrepancy’ is zero
  • Reconcile all bank accounts as of the conversion date
  • Generate and compare a Xero Trial Balance with the old system’s
  • Lock the conversion balances in Xero (Accounting > Advanced > Conversion Balances)

Need Help?

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Struggling with complex Xero migration issues or conversion balance discrepancies? Our team specializes in data cleanup and ensures a smooth transition.

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