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Outlook Integration 3.1 - Can Not Create Accounts and Contacts

I am trying to do a first time sync with Outlook 2007 and Outlook Edition 3.1.  It won't create any new SFDC Contact records from my MS Outlook Contact List that I have marked for Sync (I manually added the Category) to each Outlook Contact.  When I attempt to sync I get an error message for each attempted creation, "...No Account_ID...".
I assumed process included first creating a SFDC Account record for each unique Outlook Company_Name and then creating a SFDC Contact record linked to the correct Account record.
Any suggestions on what I need to do?