Cleanup and Archiving Strategies for QuickBooks

By Stephen L. Nelson

Deciding when and how you want to clean up or archive your QuickBooks company file is mostly a matter of common sense. Your first consideration should be whether you need to condense the company file at all.

If QuickBooks still runs at a reasonable speed, if you don’t find yourself going crazy because of many unused items in lists, or if the data file hasn’t grown monstrously large (larger than 100MB or so), you may not need to condense. In many cases, you achieve no benefit by cleaning up. And by not cleaning up, you still have complete, detailed financial records at your fingertips.

Running a cleanup operation doesn’t necessarily reduce the size of the QuickBooks data file. Therefore, if you really must have a smaller data file, you should first run a cleanup operation and then save and restore a portable QuickBooks data file.

Here’s another common-sense notion about cleaning up and archiving the QuickBooks company files: You should create an archival copy of the QuickBooks data file. In fact, create an archival copy of the QuickBooks data file at the end of the year, after you or your CPA make any final adjustments to the year.

It’s a great idea to create an archival copy of the QuickBooks data file that’s used to prepare your tax return and any financial statements, because you can always later explain some number on a return or financial statement by looking at the archival copy of the data file.

One of the problems with using QuickBooks is that people can intentionally or inadvertently change old transactions. This means that someone can, unfortunately, change transactions in a QuickBooks data file in a previous year. When that change occurs, someone who looks at the QuickBooks data file later may not be able to explain a number on a tax return or a financial statement.

For example, if someone goes back and changes a transaction in a previous year, and that transaction is used to calculate total revenues for the year, you can no longer use the QuickBooks data to explain numbers on your tax return and your financial statements for total revenue.

Fortunately, by having an archival copy of the QuickBooks data file — the QuickBooks data file that supplied numbers to your tax return and the financial statements — you can always see which QuickBooks transactions support a particular tax return number or financial statement number.

If you’re still confused about this point — and it is a little bit tricky — ask your tax advisor or your CPA about the problem. He can explain to you the danger of having a change in QuickBooks data that has been used to prepare a return or a financial statement after that return has been prepared, or after those financial statements have been published and distributed.