Use form 3115, Application for Change in Accounting Method, to request a change to the accrual basis overall method of accounting. The change should be accomplished via the Automatic Change Request procedures and will be effective for the tax year in which the request (i.e. Form 3115) is filed.
When an accounting method is changed, §481(a) provides that you must make an adjustment to take into account all adjustments necessary to prevent items from being duplicated or omitted. Duplicated or omitted items of income and expense are referred to as "adjustments" and include accounts receivable, accounts payable, inventories, and other items. Whether the change involves a single material item or a change in the taxpayer's overall method of computing income, the adjustment includes all affected items as of the beginning of the year of change. Depending on the nature of your Company's specific accounting issues, the net amount of the adjustment may be either positive (i.e., increase taxable income) or negative (i.e., decrease taxable income).
In this case where you are changing the overall method of accounting, the net §481(a) adjustment is computed by taking into account all adjustments that affect income and expense accounts. Care should be taken to eliminate items such as installment payments due on equipment purchases, loans to employees, and, in certain cases, advance payments, which do not affect the computation of taxable income.
Generally, the Sec. 481 adjustment, whether positive or negative, will be required to be takeninto account over a four year period. The IRS does have the discretion to change that requirement and may do so on its own initiative or at your request.
I recommend you consider employing a CPA or other qualified professional to accomplish this task. There are many technical issues and the accounting to calculate the 481 adjustment can be complex. If you do decide to complete it yourself, please carefully read the instructions to the form.