What is an opening balance?

A new accounting system does not start empty. On the day you switch, it has to know exactly what you own, what you owe and what others owe you. That starting position is the opening balance, and everything you book afterwards builds on it.

In practice the opening balance has two parts. The first is the balances per balance sheet account: bank, stock, receivables, payables, equity. The second is the open items, meaning the invoices that have not yet been paid, per customer and per supplier. The total of those items has to equal the balance of the receivables and payables accounts in the general ledger.

That last point is also the most important check. If the sum of the open items does not match the account balance, an item has been missed or taken over twice. You sort out such a difference before you start booking, not after the first month-end close.

The opening balance is usually made on the last day of a period. That is why we recommend switching on 1 January or at the start of a quarter: then the trial balance of the previous period is a closed, checkable basis. If you switch mid-year, the first part of the year comes along in detail through the audit file.

Anyone who leaves the opening balance sloppy notices it later in every report. A difference in the starting position stays visible in your balances for a long time. That is why the first thing you look at after a trial conversion is always the opening balance.

In our switching service the opening balance, together with the open items of receivables and payables, forms the financial starting position of your new administration. You see it in the test environment before the final transfer takes place.