Navigating the Client Co-Mingling Dilemma in QuickBooks

Recently, I took on a unique challenge when a friend approached me for assistance with QuickBooks after their long-time bookkeeper retired. For the past decade, this individual had managed their finances manually, and now they were looking to transition into the digital realm. Intrigued by the opportunity, I stepped in to help—although I swiftly realized I had bitten off more than I could chew.

The business in question belongs to a client named Liz, who operates a landscaping and gardening enterprise. As I began to delve into her financial records, a troubling pattern emerged: personal expenses were consistently being charged to the business account. This included significant items such as mortgage payments, utility bills, gym memberships, and even contributions to her IRA.

Here’s a snapshot of a typical month’s transactions:

| Vendor | Amount |
|———————————-|———-|
| Bob’s Pest Control | $1,000 |
| Jill’s Fertilizing | $600 |
| Insurance Company (Home & Auto) | $3,000 |
| Ed’s Nursery | $2,000 |
| Chase Bank (Mortgage) | $3,500 |
| Comcast | $200 |
| AT&T | $200 |
| SIMPLE IRA | $4,000 |

As I analyzed these expenses in QuickBooks, it became clear that legitimate business costs, such as pest control and nursery supplies, were intermixed with personal expenditures, raising a substantial co-mingling issue. It became evident that the business account was not just for business purposes; personal bills were also being paid from it—which contradicts best Accounting practices.

In my discussions with the retiring assistant, I learned that the SIMPLE IRA contribution was Liz’s personal investment, not a business expense, yet it was being processed through the company’s financial records.

So, what should I do now? I find myself at a crossroads. On one hand, I could insist that Liz clearly delineate her business and personal expenses moving forward. On the other, I’m contemplating whether to categorize these personal charges as “Owner Draws” in QuickBooks, allowing for a potentially simpler, albeit not the most precise, Bookkeeping solution.

Every time I bring up this issue, both Liz and her former assistant seem perplexed or even irritated, likely because they have relied on a manual ledger system for so long. They pass their records to