Simple steps to start a NEW QuickBooks Desktop Pro/Premier/Enterprise file using an existing company file that is too big, too slow, too messy, and/or too corrupted to continue using… Using the Condense method.
For some context, a lot of businesses with QuickBooks Enterprise company files that are larger than 1.5gb, tend to experience a lot of issues (mentioned above) with the file and make the executive decision to “start over” or make a new file. The problem with this is that importing opening balances and open transactions to have some sort of continuity of business with minimal interruption could be a long and expensive process. We typically get asked to do this work over a long weekend and we charge $10k or more to do this work. So as an alternative, I would like to propose that you might be able to do this on your own and should take 1 or 2 days max if you get your whole bookkeeping team working together to achieve this…. here are the steps:
***NOTE: If you use QuickBooks Accountant or QuickBooks Desktop Enterprise Accountant editions, I might suggest using a PERIOD COPY method instead, is a slightly different approach
- Step 1, pick the official start date, let’s assume for the sake of this example that is going to be 01/01/2022. IF there are transactions dated on 01/01/2022 in the current file, please change them to 01/02/2022 at least temporarily, leaving 01/01/2022 clear of transactions (see step 5 for the logic behind this).
Note: I STRONGLY recommend that you make sure your books are truly cleaned up and “tax return ready” as of 12/31/2021 to make sure you don’t bring over garbage. See this article: https://qbkaccounting.com/tax-return-ready-financial-statement/ - Step 2, once all your books are completed, reconciled, and/or closed for up to 12/31/2021, go ahead and print P&L and Balance Sheet from the beginning of time up to 12/31/2021 BY YEAR so you have clear what is the history that is going to be deleted.
- Step 3, print/save a file with all the details: Customer Balance Summary, Customer Balance Detail, Vendor Balance Summary, Vendor Balance Detail, Open Sales Orders, Open Purchase Orders, and the Inventory Valuation Summary Reports, ALL up to 12/31/2021.
If you have open Sales Tax Liabilities and open Payroll Tax Liabilities, I also suggest you get the reports with those details so you know which govt. Bodies to pay and when, starting 01/01/2022
Note: Please make sure that your inventory valuation report matches your Inventory Asset account balance as of 12/31/2021, if it doesn’t, we will need to do another adjustment to this AFTER the condense, see Step 12 - Step 4, decide which are the transactions from BEFORE 01/01/2022 that you want to preserve in your new company file. These are typically: Open Estimates, Open Sales Orders, Open Invoices, Open Bills, Unapplied A/R (Credit Memos / Payments / other transactions affecting A/R), and Unapplied A/P (Vendor Credits, Bill Payments / other transactions affecting A/P), etc.
- Step 5, once you decide which are those transactions, you are going to manually select EVERY one of those transactions and change the date of them to 01/01/2022 (and I recommend to add the original transactions date to the memo field, so you can change it later on after the Condense).
Note: If you have any A/R transactions (invoices, payments, credit memos) or A/P transactions (bills, bill payments, bill credits) that have PARTIAL payments from which part of the payment happened before 01/01/2022 and the other part should come after 12/31/2021; then you need to modify the transaction that is being moved to 01/01/2022 to match only the OPEN balance portion of the transaction, the best way to do this is to split it into two transactions (the open portion and the paid portion) that way you only move the open portion of the transaction. This is probably the trickiest part of the process! - Step 6, find all the outstanding checks, deposits, and credit card charges that are affecting banks and credit cards up to 12/31/2021 but have not been reconciled and also move them to 01/01/2022, just keep track of their original dates as well as in Step 5
- Step 7, once all the transactions have been moved, your balance sheet’s A/R and A/P should be incorrect as of 12/31/2021 (based on the previously printed reports),, but if you look at 01/01/2022, it should match. So you should be ok
- Step 8, Go to File, Utilities, Export, Lists to IIF, select all the lists and export them to an IIF file so you can have that handy just in case
- Step 9, Login as Admin, and perform a Condense up to 12/31/2021 (File, Utilities, Condense Data… then select “Remove all transactions…” and then “Transactions before Specific Date 01/01/2022”, and then select “ Create one summary Journal Entry (recommended)”, and select the option to “Remove the ALL the following transactions”, and finally decide which unused list entries you want to delete… you should have an IIF file from step 7 just in case you want to import the data. If there is Inventory, I recommend that you “summarize Inventory transactions (recommended)” but if you do not have inventory, you won’t even see that option.
- Step 10, After the condense is completed, you should have two company files in your computer; the old file with a “ Date – Copy” appended to the file name and the new file with the same file name as before. You can access the old file for reference, but make sure you are not inarventenly opened inside the old file creating new transactions, I recommend going into Edit, Preferences, Desktop View, My preferences and change the Company File Color Scheme to another color to make it very obvious to the user when they are on the old file vs. new condensed file.
- Step 11, reverse all the actions from Steps 5 and 6, and move all the transactions sitting on 01/01/2022 back to their original dates or at least move them to 12/31/2021 so you can now run a report for the Balance Sheet as of 12/31/2021 and it should be back to normal. At the very least A/R and A/P should be 100%.
If any of the other Balance sheet amounts do not match (other than A/R, A/P, and Inventory Asset), just do a journal entry against Retained Earnings as of 12/31/2021 and that should do the trick. - Step 12, ONLY IF you inventory valuation summary is off, you can make an inventory qty and value adjustment to match the previously printed version – use Retained Earnings as the adjustment account as of 12/31/2021. And when you match them, you can make a journal entry against the Inventory Asset account if the balance and retained earnings if the balance is still off in the balance sheet as of 12/31/2021.
Note: your Inventory valuation report is supposed to match the Inventory Asset account in the balance sheet, if it doesn’t you might need to make a 01/01/2022 adjustment against COGS affecting your net income in 2022 to make sure that these balances match, as this is a correction to an accounting error.
You should have the following in your “new file”:
- All your customers (or only the customers that had transactions dated after 12/31/2021 if you chose that option)
- All your vendors (or only the vendors that had transactions dated after 12/31/2021 if you chose that option)
- All your items (or only the items used in transactions dated after 12/31/2021 or a value in inventory, if you chose that option)
- All your other names (or only the names that had transactions dated after 12/31/2021 if you chose that option)
- All our accounts in the Chart of Accounts (or only the accounts in transactions dated after 12/31/2021 or with a balance as of 12/31/2021, if you chose that option)
- All the transactions dated after 12/31/2021, including the ones you moved the dates back to pre-01/01/2022 on step 11.
- All your templates, logos, attachments for transactions that were kept during the condense
- All your memorized transactions
- All settings and preferences
- Beginning balances as of 12/31/2021 in balance sheet (summary) and details of all open transactions kept during the condense that were moved back to pre-01/01/2022 on step 11
What you will need the “old file” for:
- Looking at any historical transactions or reports from before 01/01/2022
Questions? Thoughts? hector@garciacpa.com
