How Do I Clean Up Old Transactions in QuickBooks?

Maintaining clean financial records is vital during business transitions. When circumstances change, updated books allow business owners to accurately discern the financial health of the business and strategically plan for the future. Securing bank loans, weathering audits, maintaining aggressive business growth, filing insurance claims, and resolving ownership disagreements are all instances when transactions are scrutinized for accuracy and timeliness. 

However, outdated or erroneous transactions can linger, muddling financial records and hiding the true value of the business.

In situations when businesses add employees, expand product/service lines, update billing policies, use new shipping channels, or change the timing of their invoices, financial records can become muddled. While the business may look the same externally, its inner financial shortcomings can undermine operational efficiency.

When the transactions get more complicated or increase in frequency, existing employees’ financial skills and capacity cannot necessarily keep pace. The result is an unorganized ledger that can affect the balance sheet and cash flow statement.

In other scenarios, a business’s future needs may not be fully understood, thwarting planning efforts and creating a case where accounting functions end up falling short of these unforeseen expectations even when executed by more experienced personnel.  

Purging old transactions removes distracting clutter and improves reporting accuracy while increasing financial accountability. The result is improved confidence in decision-making for more sustained growth.

Timing

Maintaining data indefinitely can slow down report generation and ongoing management. Once the required retention window for data has passed, financial transactions should be removed for the sake of good housekeeping. Before performance issues arise, save historical data as an archived copy and then clean up old transactions to make everyday use easier. Get financial accounts in order to prepare for upcoming activities like loan applications or investor funding rounds and what-if scenarios like audits or owner disputes.

The Process

QuickBooks stores the details of each credit and debit transaction, but these can be deleted or voided as needed. The process to do so is fairly straightforward, but many business owners get confused about the operational difference and subsequent business implications.

Deleting a transaction removes it entirely from the platform, and although the Audit Log may still contain some details, it cannot be restored. Voiding a transaction reduces it to a zero-dollar value and removes any associated payments. After the transaction is voided the details are retained within QuickBooks without affecting financial reporting or account balances.

While both are irreversible, deletion should only be used when the transaction was created in error. Otherwise, the transaction should be voided to abide by good accounting practices and keep the associated transactional details for future reference. Unfortunately, estimates, deposits, vendor credits, purchase orders, delayed charges, delayed credits, and bills cannot be voided. Transactions also cannot be voided in bulk, making it a potentially time-consuming process depending on how many need to be voided.  

The Condense Data Tool is a way to address old transactions that streamlines the process for higher volume businesses. Condensing removes all transactions before a certain date and consolidates these older transactions. This tool is helpful for business owners that need to manage outdated transactions at scale.

• Tip: Before using the Condense Data Tool save and view a copy of the balance sheet and P&L statement to compare the new financial statements to after the tool has run. If the statements do not match, the condense function did not work properly, and a backup restore may be required.

Professional Assistance

Business owners looking for an easy way to clean up their books have several options:

Specialized Software
​
QuickBooks add-ons can be purchased relatively inexpensively to automatically clean up the books by removing financial transactions. However, while these complementary solutions are quick fix, they are not magic. Financially savvy business owners will likely see more of a benefit from this type of supplementary software than their less savvy counterparts because while the program can do the technical work, it cannot discern the logic behind it. Therefore, the onus is still on the business owner to genuinely understand the strategic reasoning and methodology needed to run the software effectively. In some cases, this software can actually cause more harm than good because misapplication can skew financial transactions in a way that negatively affects cash flow.

Internal Specialist

Hiring an internal bookkeeper, accountant, or finance professional is the best way to take control of business transactions and other financial components. However, this solution comes at a steep price. The cost associated with recruiting, screening, hiring, and onboarding a dedicated specialist internally is out of the reach of many small businesses. For most business owners, this process is not only daunting and costly, but also time prohibitive.

Third-Party Expert

​The financial savvy required to run add-on software as well as with the cost and time required to hire internally are motivation enough for some business owners to look externally. Paying a third-party company is a cost-effective way for business owners to get the help they need when they need it. Whether it is an occasional accounting clean up, ongoing financial management, or tax preparation help, an accounting firm can provide the necessary help.

Need help with cleaning up your QuickBooks?  We can help!  Contact us today!