Quickbooks Tip: How to Lock the Previous Year

lock-143616_960_720It’s not uncommon for small business owners and professional accountants to “close” previous years, preventing any accidental transactions or changes being made to those years. If you are 100% certain that you don’t need to make any changes to a particular year, for instance, it’s best to close that year. Doing so reduces the risk of errors which could otherwise throw off your bookkeeping.

While there’s no option to close previous years in Quickbooks, you can still “lock” them. The purpose of locking previous years is the same: it prevents changes from being made to the locked year or years. Some business owners prefer to leave their years open, which isn’t necessarily bad if you have to make regular changes to previous years. But if you don’t make such changes, it’s best to lock these years to prevent errors and discrepancies.

So, how do you lock previous years in Quickbooks? You’ll need to use the program’s “Set Closing Date and Password” feature. This is done by logging into your Quickbooks account, opening your company file and choosing Edit > Preferences > Accounting > Company Preferences. From here, you’ll see a new window appear with options associated with your Quickbooks company preferences.

Click the option at the bottom of this window called “Set Date/Password,” at which point you’ll see a new window that says “To keep your financial data secure, Quickbooks recommends assigning all other users their own username and password, in Company > Set Up Users.”

But you’ll want to pay close attention to the “Closing Date” prompt, as this indicates the date before which your company file cannot be changed. If you want to lock your previous year, for instance, select December 31 of last year as the closing date.

Upon choosing a closing date for your company file, you’ll need to enter a new password. This isn’t the same password used to log into your Quickbooks account. Rather, it’s an entirely new password that’s used specifically for this purpose. Granted, you don’t have to create a password here. But if you don’t, anyone who attempts to enter a change for the closed year or years will receive a warning. This is bad because users can still make changes to the closed year or years, with Quickbooks only giving them a warning. The bottom line is that you should always create a password when closing/locking one or more years.

Did this tutorial work for you? Let us know in the comments section below!

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