Hi, @Nadia-Groenewald. Thanks for reaching out here in the Community forum.
The warning message you are seeing, along with the greyed-out button, indicates that QBO still flags the complete or cancelled projects as active, regardless of their true status. You do not need to delete the cancelled projects first, as both completed and cancelled projects are what is causing the blockage. We need to delete/archive all of them to successfully make the customer inactive.
Also, please note that if there are any unbilled charges, you won't be able to make the customer inactive.
Before deleting the project, it is good practice to print or export the Project Profitability report to save its data. However, the data will still be accessible even after deletion, you can run the report and view the information marked as Deleted.
QuickBooks will allow you to delete projects without affecting the underlying financial transactions (invoices, expense, time entries). The transaction will still exist and remain linked to the customer, but the project container itself will be removed, which will clear the blockage. These transactions can still be viewed in reports such as the Sales by Customer Detail or Transaction list by Customer reports filtered by the Customer.
If you have many customers to delete, you can follow the steps provided in this article: Delete customers in QuickBooks.
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