Chapter 2

Protecting Your Data

IN THIS CHAPTER

Making a backup of the QuickBooks data file

Restoring the QuickBooks data file from a backup

Archiving and condensing QuickBooks data

In this chapter, I tell you how to protect your QuickBooks data. Principally, protecting your data requires that you back up the data. If you back up your data, you have a second copy available in case the original data file goes bad or becomes corrupted.

Because archiving and data file compression are related to backing up and restoring QuickBooks data files, I also talk about archiving in this chapter. When you archive QuickBooks data files, you create a permanent record of the data files. You also have the option of condensing the current working data file.

Backing Up the QuickBooks Data File

A critically important task that either you or some co-worker needs to complete is a backup of the QuickBooks data file. I respectfully suggest that few items stored on your computer’s hard drive deserve as much caretaking as the QuickBooks data file does. Quite literally, the QuickBooks data file describes your business’s financial affairs. You absolutely don’t want to lose the data file. Losing the data file might mean that you don’t know how much money you have, you don’t know whether you’re making or losing money, and you won’t be able to easily or accurately prepare your annual tax returns.

Backing-up basics

Fortunately, backing up the QuickBooks data file is rather straightforward. You need to complete only nine steps:

1. Choose the File ⇒ Create Copy command.

   QuickBooks displays the first Save Copy or Backup dialog box (see Figure 2-1), which provides three options: the option to save a backup copy of your QuickBooks file, the option to create a portable company file, and the option to create an accountant’s copy.

   

   FIGURE 2-1: The first Save Copy or Backup dialog box.

2. You want to save a backup copy, so select the Backup Copy option button; then click Next to continue.

   You can create either a full backup file or a portable company file when you copy the QuickBooks file. A portable company file is smaller than a backup file, so it’s more convenient to move around. You can more easily email a portable company file, for example. The rub with portable company files is this: QuickBooks must work hard to scrunch the portable company file to a small size. QuickBooks also has to do more work to unscrunch the file later, when you want to work with it.

   After you click Next, the second Save Copy or Backup dialog box appears (see Figure 2-2).

   You can go directly to the Save Copy or Backup dialog box by choosing the File ⇒ Create Backup command.

   

   FIGURE 2-2: The second Save Copy or Backup dialog box.

3. Indicate whether you want to save your QuickBooks backup file on your company’s computer or to QuickBooks’s offsite data center.

   Choose Local Backup to indicate that you want to store the backup copy of your file on your computer’s hard drive or some removable storage device, such as a USB flash drive.

4. Click the Options button to choose a backup location.

   QuickBooks displays the Backup Options dialog box, as shown in Figure 2-3.

   

   FIGURE 2-3: The Backup Options dialog box.

5. Specify the folder or drive location to which the company file should be backed up.

   Enter a pathname directly in the text box to tell QuickBooks where to save your backup copies.

   If you don’t know how to enter a pathname, click the Browse button. When QuickBooks displays the Browse for Folder dialog box, use its folder list to select the drive or folder you want to use for QuickBooks backups.

6. (Optional) Select your backup options.

   You can also use the Backup Options dialog box to specify when QuickBooks should remind you to back up and how QuickBooks should back up:

   • Adding time stamps: To add the date and time of the backup operation to the backup file’s name, select the check box titled Add the Date and Time of the Backup to the File Name (Recommended).
   • Limiting backup copies: To tell QuickBooks to get rid of old backup copies, select the check box titled Limit the Number of Backup Copies in This Folder to X and then specify how many backup copies you want to keep by using the adjoining text box.
   • Setting backup reminders: Select the check box titled Remind Me to Back Up When I Close My Company File Every X Times to specify that you want to be reminded to back up the QuickBooks file when you close QuickBooks. Your interval options include every time, every other time, every third time, and so forth.
   • Enabling data verification: Use the verification buttons to tell QuickBooks that it should check for data integrity when it backs up your data. Select the Complete Verification (Recommended) radio button for QuickBooks’s best and most comprehensive verification. If you’re someone who doesn’t have time for the extra few seconds of double-checking that data verification takes, sure, select the Quicker Verification radio button. Better yet, throw caution completely to the wind — caution is for babies anyway — and select the No Verification radio button.

7. Click OK when you finish specifying the backup location and options and then click Next.

   QuickBooks displays a dialog box (see Figure 2-4) that asks when you want to back up.

8. Specify when you want to back up.

   Typically, you want to back up when you choose the Save Copy or Backup command. In this case, when QuickBooks displays the Save Copy or Backup dialog box that asks the “when” question, click the Save It Now radio button. Alternatively, you can tell QuickBooks to schedule regular backups of the QuickBooks data file according to some clever scheme by — when QuickBooks asks the “when” question — clicking the Save It Now and Schedule Future Backups radio button or by clicking the Only Schedule Future Backups radio button. If you tell QuickBooks that you want to schedule backups, QuickBooks displays a couple of dialog boxes that you use to create the new backup schedule by naming the schedule and by setting the days and times when backups should be scheduled.

   

   FIGURE 2-4: The Save Copy or Backup dialog box asks when you want to back up.

9. Click Finish to close the Save Copy or Backup dialog box.

   When you’ve specified how the backup operation should work, click Finish. QuickBooks backs up (or creates a copy of) the current QuickBooks company file and stores that new file copy in the backup location.

What about online backup?

If you’re observant, you may have noticed that the Save Copy or Backup dialog box shown in Figure 2-2, earlier in this chapter, includes an Online Backup radio button. If you want to find out more about backing up the QuickBooks company data file online — which means using Intuit’s computer network rather than your computer or some removable disc to store the backup — you can select that radio button.

For what it’s worth, I strongly recommend that you consider using the online backup method, for two reasons:

• Reasonable cost: Online backup is extremely reasonable (it might even come at no additional charge if you have QuickBooks Desktop Pro Plus, Premier Plus, or Enterprise), with pricing based on the timeline (a monthly subscription will cost more per month than an annual subscription) and on whether you’re backing up just QuickBooks or all files on your PC. Backing up all files with an annual subscription seems to be the best value.
• Less effort: Online backup can make the task of backing up less difficult and more regular as long as you have a reliable Internet connection. You don’t need to remember to back up and then remember to take the backup disc home.

Two quick final points: Yes, I use the online QuickBooks backup option myself (and to back up all my important files). No, Intuit doesn’t pay me some sort of secret commission to tout the product.

You can store backup files in a folder that syncs with a cloud-based backup, such as Dropbox, Google Drive, or Microsoft’s OneDrive. Each of these services offers a free set-and-forget, cloud-based backup if you use the free storage space offered by any of them. This type of service is definitely an option for users who are on a budget or have limited resources.

Some backup tactics

Backing up is mostly a matter of common sense. That being said, however, let me give you some ideas about how, when, and maybe why you should back up:

• Make it easy. I mention this in my recommendation concerning the online backup option, but the point deserves mention again. The most important thing you can do regarding QuickBooks data file backup is this: Make backing up easy. This probably means considering the online option, but if you do go local, you want to have a high-density, removable storage device that you can use with the computer you use to run QuickBooks. I use a small USB flash drive. Choose what device works best for you, but you definitely want some similarly easy-to-employ storage device. In this case, easy means that backing up is more likely to occur.
• Back up regularly. I recommend that you back up every time you enter transactions in the QuickBooks data file. Obviously, if backing up represents a lot of work, you won’t want to do it. But if you have an easy way to back up and a convenient storage device to back up to, you can — and should — back up regularly. Daily isn’t too often.
• Store a backup copy of the QuickBooks data file offsite. One final important point worth mentioning: Many of the events that may destroy or corrupt your data file are specific to your computer, such as a hard drive failure, a virus, a user accident, and so forth. Some of the events that may corrupt or destroy your QuickBooks data file, however, are location-specific. Fire, flood, or theft can cause you to lose the QuickBooks data file and its backup. For this reason, you want to store a copy of the backup offsite. At the end of the week, for example, you may want to pop the flash drive in your shirt pocket or purse and take it home. Make sure that if something corrupts or destroys the QuickBooks data file, that same something doesn’t also destroy the backup QuickBooks data file.

Restoring a QuickBooks Data File

If you find that the working copy of the QuickBooks data file becomes corrupted or gets destroyed, you need to restore the QuickBooks data file so that you can begin using QuickBooks again. Restoring the QuickBooks data file is easy if you’ve recently backed it up (see the preceding section).

If you haven’t recently (or ever) backed up the QuickBooks data file, you’ll have to restore the QuickBooks data file, which means starting over. You’ll have to rerun QuickBooks Installation and Setup and reenter all the old data, for example. In short, restoring without a backup copy of the QuickBooks data file means that you go back to square one.

To restore the QuickBooks data file from the backup copy of the file, put the backup disc into the drive or plug in the USB flash drive and then follow these steps:

1. Launch QuickBooks, and choose the File ⇒ Open or Restore Company command.

   QuickBooks displays the Open or Restore Company dialog box, as shown in Figure 2-5.

2. Indicate what type of file you want to restore.

   You can open a regular QuickBooks data file, restore a backup copy of the regular QuickBooks file or a portable version of the file, or convert an accountant’s copy transfer file. If you want to restore a backup copy, predictably, you select the radio button labeled Restore a Backup Copy.

   

   FIGURE 2-5: The Open or Restore Company dialog box.

3. Click Next.

   QuickBooks displays another version of the Open or Restore Company dialog box, as shown in Figure 2-6.

   

   FIGURE 2-6: The Open or Restore Company dialog box that asks where you’ve backed up.

4. Tell QuickBooks whether the backup copy is stored at your company or at QuickBooks’s offsite data center.

   To do this, select the radio button that labels your backup copy file’s location.

5. Click Next.

   QuickBooks displays the Open Backup Copy dialog box, as shown in Figure 2-7.

   

   FIGURE 2-7: The Open Backup Copy dialog box.

6. Double-click the backup file that you’ll use for the restoration.

   Specify the location of and then the specific backup file that you’ll use for the restoration. You can use the Look In drop-down list to identify the drive and folder storing the backup file.

7. Click Open.

   QuickBooks displays yet another version of the Open or Restore Company dialog box (not shown), which simply tells you that QuickBooks is about to ask you where you want to store the newly restored file. (The fact that QuickBooks needs to tell you that it’s about to ask a question is a little strange, but let’s not get bogged down with that.)

   When you restore the company data file by using the backup copy, you destroy the current working version of the file. In other words, QuickBooks takes the backup copy and copies it over the to-be-restored company data file. Therefore, before you restore company data files, make sure that you’re using the right backup copy and that you’re overwriting the corrupted, to-be-restored company file.

   If you’re uncomfortable deleting or overwriting the old (possibly corrupted) QuickBooks data file, you can use a new filename for the restored file. You do this as part of Step 9.

8. Click Next.

   QuickBooks displays the Save Company File As dialog box, as shown in Figure 2-8.

   

   FIGURE 2-8: The Save Company File As dialog box.

9. Tell QuickBooks where it should restore the backup copy and then click Save.

   Use the Save Company File As dialog box to pick a location for the backed up file. You’ll probably pick the same location as the existing file. If you do this and also use the same name for the QuickBooks file, QuickBooks displays a message asking you to confirm that you want to overwrite the existing file. Click Yes. Then QuickBooks displays another message box titled Delete Entire File. Confirm that you want to delete the existing (and presumably corrupt) company data file by typing the word yes in the message box. Then click OK. QuickBooks uses the backup copy to overwrite the to-be-restored company file. Again, however, note that you can also choose to use a new filename for the restored file.

   You’re now free of the rather persistent dialog boxes. Whew.

   Note: If you restore your QuickBooks data file in a newer version of QuickBooks than the version you used to create the backup copy, QuickBooks displays a dialog box that asks whether you’re okay with the fact that the company file will be updated for the new version. In this case, you confirm by checking a box that says (in essence), “Hey, man, I understand that my company file will be updated to the new version.”

10. Enter any transactions that took place since your last backup.

    If you entered transactions after you last backed up the QuickBooks company file, you now reenter those transactions in QuickBooks. If you last backed up QuickBooks on Friday of last week, for example, you need to reenter any transactions that you’ve created since last Friday.

Condensing the QuickBooks Company Files

The QuickBooks file condense process does two things:

• The QuickBooks Condense command creates a permanent copy of the QuickBooks data file. (This copy is called an archival copy of the file.) An archival copy of the company file amounts to a snapshot of the company file as it existed at a particular point in time. If somebody later has a question — perhaps your accountant, or a federal or state auditor — you can use the archival copy of the data file to show what the company file looked like at a particular point in time.
• The file condense process makes the data file smaller by summarizing many old closed, detailed transactions that use monster journal entries.

Because this condensing and archiving can be a little bit confusing, let me quickly summarize exactly what happens when you condense the QuickBooks company file. Here’s what QuickBooks typically does during the process:

• Saves an archive copy of your company files: When you condense the QuickBooks company file, QuickBooks saves an archival copy of that file.

• Removes closed transactions: As part of the condensation process, QuickBooks gives you the opportunity to remove old, closed transactions from the current, working version of the QuickBooks company file. Remember that archiving creates an archival copy of the QuickBooks company file. You still have the working version of the QuickBooks company file, however, and it’s this current, working version of the QuickBooks company file that gets cleaned up, or condensed, by the removal of old, closed transactions.

  Closed transactions are transactions that QuickBooks no longer needs to track in detail. An old customer invoice — after it’s been paid — is a closed transaction. An old check written to some vendor — after it’s cleared the bank — is a closed transaction.

• Summarizes closed transactions: Because the old, closed transactions are removed from the QuickBooks data file, condensing typically creates summary monthly journal entries for the old, closed transactions and places these summary transactions in the current, working version of the QuickBooks data file. These summary monthly journal entries allow you to continue to prepare monthly financial statements. Even though archiving removes all the old, closed transactions from, say, January 2018, you can still produce financial statements for January 2018 in 2022. To produce monthly financial statements for January 2018, QuickBooks uses the summary monthly journal entries.
• Clears the audit trail: As I mention in Book 7, Chapter 1, QuickBooks maintains an audit trail showing who entered what transactions. One almost-hidden effect of the cleanup of the QuickBooks data files concerns the audit trail. If you clean up a company file and indicate that the company file should be condensed, QuickBooks clears the audit trail before the “removed closed transactions on or before” date. In other words, for the period of time in which QuickBooks removes old, closed transactions, it also removes the audit trail of those transactions.

The condense file process typically means creating a copy of the QuickBooks data file that you put away someplace and then creating a scaled-down version of the working company file. The command that you use to condense the QuickBooks company file, however, also allows you to create almost-empty company files. Most people never need to use this option. I can think of only one category of QuickBooks users who may want to create almost-empty company files: CPAs and consultants (who want to reuse a company file for another business unit or client) may want to use this command to create company data files that have many of the lists set up already. I don’t go into any further detail on creating an almost-empty company file by using the archiving command, but you should know that it’s there.

Cleanup basics

When you understand what archiving is all about, the process is quite straightforward. To condense the QuickBooks company file, follow these steps:

1. Choose File ⇒ Utilities ⇒ Condense Data.

   QuickBooks displays the Condense Your Company File dialog box, shown in Figure 2-9.

2. Select the radio button titled Remove the Transactions You Select from Your Company File and then click Next.

   The Condense Data dialog box opens (see Figure 2-10).

3. Select the Transactions Before a Specific Date radio button.

   This option, shown in Figure 2-10, tells QuickBooks that you want to do two things: create an archival copy of the QuickBooks data file, and skinny down the working company file so that it isn’t so big. QuickBooks reduces the size of the working version of the company data file by removing old, closed transactions if you choose in Step 2 to remove transactions.

   

   FIGURE 2-9: The Condense Your Company File dialog box.

   

   FIGURE 2-10: The Condense Data dialog box.

4. Specify the Remove Transactions Before date.

   To specify the date before which closed transactions should be removed, enter the date in the date box. If you want to condense the file by removing transactions on or before December 31, 2018, for example, enter 1/1/2019 in the date box. You don’t need to feel compulsive about removing a bunch of closed transactions, however. You remove closed transactions only if your QuickBooks company file is getting too big. You can easily work with a QuickBooks company file that’s 25MB, 50MB, or even 100MB (megabytes).

   Although typically, you condense a QuickBooks file by removing old, closed transactions, the Condense command also creates files without transactions and files with only a specified data range of transactions. To create a file that holds lists and preferences but no transactions, select the All Transactions radio button. By the way, you might use the All Transactions option to build a nearly empty file that you could reuse (such as for training). To create a QuickBooks file that holds a specified range of transactions, select the Transactions Outside of a Date Range radio button and then enter the dates that bookend the range in the Before and After boxes.

5. Click Next when you finish specifying which transactions QuickBooks should remove.

   QuickBooks displays the Condense Data dialog box shown in Figure 2-11.

   

   FIGURE 2-11: The second Condense Data dialog box.

6. Specify how transactions should be summarized.

   If you want to summarize historical transactions, QuickBooks uses a Condense Data dialog box to ask how it should summarize historical data: with a single summary journal entry, with monthly summary journal entries, or no summary at all. Select the radio button that corresponds to the summarization approach you want. (Usually, you select the second option — having QuickBooks create monthly summary journal entries — so that you can still generate meaningful comparative monthly reports.)

7. Click Next when you finish specifying how QuickBooks should summarize transactions.

   QuickBooks displays the third Condense Data dialog box, as shown in Figure 2-12.

   

   FIGURE 2-12: The third Condense Data dialog box.

8. Specify how inventory transactions should be condensed, and click Next.

   If your QuickBooks file includes inventory transactions, QuickBooks recommends that you remove old inventory transactions. When QuickBooks displays the fourth Condense Data dialog box, you can tell QuickBooks to do just this by selecting the Summarize Inventory Transactions (Recommended) radio button. (If you don’t want to remove old transactions, select the Keep Inventory Transaction Details radio button.)

   When you click Next, you continue to the fourth Condense Data dialog box (not shown), which asks which transactions should considered to be closed.

9. Specify which transactions should be removed, and click Next.

   QuickBooks asks for a bit more information about exactly what constitutes a closed or old transaction that should be removed. You select check boxes to indicate whether transactions before the removal date should be removed even if they’re uncleared, marked To Be Printed, flagged as To Be Sent, and so on.

   When you click Next, you move on to the fifth Condense Data dialog box (see Figure 2-13).

10. Specify any list cleanup that should occur, and click Next.

    Use the fifth Condense Data dialog box to tell QuickBooks that in addition to removing old closed transactions, it should clean up some of the lists. You can select check boxes that tell QuickBooks to remove unused accounts, unused customers, unused vendors, and so forth. By cleaning up your list through the removal of unused list items, you not only reduce the size of the company file, but also make it easier for people to work with the list.

    When you click Next, QuickBooks displays the sixth Condense Data dialog box, as shown in Figure 2-14. The dialog box tells you that the archival process begins with QuickBooks making a copy of the data file and that the condensation operation may take several minutes or even several hours to complete.

    

    FIGURE 2-13: The fifth Condense Data dialog box.

    

    FIGURE 2-14: The sixth, and final, Condense Data dialog box.

11. Click Begin Condense.

    QuickBooks begins the process of condensing the data file.

12. Back up the data file when prompted.

    At the beginning of the condensation process, QuickBooks prompts you to back up the QuickBooks company file. Backing up the QuickBooks company file as part of a condense operation works the same as backing up the QuickBooks company file at any other time. If you have questions about how to back up the QuickBooks company file, refer to “Backing-up basics” earlier in this chapter.

    After you back up the QuickBooks company file, QuickBooks saves an archival copy of the company file and then cleans up the working version of the company file according to your instructions. Again, as noted in the earlier steps, the cleanup process may take only a few minutes, or it may take several hours if your file is very large.

Some cleanup and archiving strategies

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.

My technical editor wants me to point something out here: He notes that running a cleanup operation doesn’t necessarily reduce the size of the QuickBooks data file as much as possible. He says, therefore, that 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, I recommend that you create an archival copy of the QuickBooks data file at the end of the year, after you or your CPA make any final adjustments for 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 in a tax return or financial statement by looking at the archival copy of the data file.

Throughout this book — and most recently in Book 7, Chapter 1, which discusses administering QuickBooks — I mention that one of the problems with using QuickBooks is that people can intentionally or inadvertently change old transactions. This means, unfortunately, that someone can 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 in a tax return or a financial statement. If someone goes back to change a transaction in a previous year, and that transaction is used to calculate total revenue 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. That makes sense, right?

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 adviser or your CPA about the problem. He or she 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.