For any business, managing your books via QuickBooks is something that is driven by a desire to simplify things. For many people, it just seems simpler to keep all your data in a single file because that way is obviously easier, right? I’d like to take a little bit of time to explain why this method of thinking can be more harmful than you realize; and, ultimately, how you can complicate things beyond your expectations.
What Happens When Things Are Too Crowded
Carrying on with the theme of simplicity, let’s use an example to illustrate our point. Imagine if, you will, your database is like a filing cabinet. It is inefficient to take 10 years of business, that means, every receipt, bill, invoice, bank statement and reconciliation and stuff it into a file cabinet. Imagine adding your daily transactions to this monster, every single day. Eventually, your cabinet would begin to overflow. But, let’s say we keep going anyway; you would get to a point where it’s difficult to open the cabinet, not to talk of trying to enter new entries. It would even be difficult trying to look at your old business in the cabinet. If you tried to move things around, you’re more likely to end up with a big mess, and your files permanently out of order, just as the act of trying to move sections of the data can invite disaster. So now you’ve become locked into this system. Your old documents aren’t easily retrievable, so they are as good as damaged or lost. There’s no way for you easily and quickly transition your data into a more organized or efficient manner and, maybe, the best you can do is start a new filing system over from scratch.
What Would Happen to Your Company File
Your QuickBooks company file is the same way; it is simply not productive to keep 10 years of data in your company file. Doing something like that will naturally increase the size of your data. QuickBooks is a relational database, meaning it maintains links between nearly all the data you enter in it. The larger that history of data grows, the greater the burden you place on the system and the more resources, such as: computer memory, network equipment, and hosting you need to leverage to keep your data accessible. For some companies, it is no great burden to invest in these resources, so they can run QuickBooks in a way they are accustomed to; but, for many small businesses, the goal is to keep things simple.
How to Manage Your Data in QuickBooks
To that end, there are many things you can do to make life easier on yourself, so you can focus on your business. As a general recommendation, you should keep only the last three to five years of data in your file. When you begin to near the recommended limit of years in your data file, you can create a new company file and carry over your lists from the previous file very easily. The old file can be kept as a reference, if you need to look up old orders or history. In the new file, you can create entries for your open balances for whatever cutoff date you choose. If you own the Enterprise edition of QuickBooks, you can have the reference file and your new file open at the same time.
When Your File is Nearing the Tipping Point of Manageability
If you find yourself in a situation where you have let several years of data build up in your file, and you’d like a more detailed transaction history in your new file, ebs has solutions available for you. We offer services to help you bring over your transaction history. We also have the experience to help guide you on how to make cut-offs in your file, and make sure you retain the accuracy of your historical data and help you remain true to your tax return.