I received a support call. This customer of mine is using QuickBooks Pro version 2005/06 and they are looking into condensing their past year QuickBooks data.
QuickBooks does provide an Archive and Condense feature to condense your company file. After condensing your company file, the file size will become smaller and more efficient in entering transactions or printing out reports.
Before you condense your data, you should do a proper backup. Besides, you should print out the financial reports to compare it after condensing of data is done.
Personally, I don't like to condense my company file. I did see some data files couldn’t be migrated to a higher version once the condensing of data was done. If remember correctly, the issue was due to the payroll transactions. The condensed payroll transactions could not be migrated to a higher version.
I prefer to set up a new company file instead of condensing data. I usually recreate a new company file and start entering the opening balances for the new financial year. I will keep the old company file as a reference. This method is cleaner and speed is much faster than a condensed data.