Navigating Client Co-Mingling Issues in QuickBooks: A Guide for Beginners

When stepping into the world of Bookkeeping, especially using software like QuickBooks, many professionals find themselves confronted with challenges that can feel overwhelming. This was precisely the case for a friend of mine, who sought help as she transitioned from hand-written records to the digital realm of QuickBooks after her long-serving assistant retired.

She had been managing her gardening and landscaping business for a decade without any digital Accounting system, relying instead on a manual ledger. With no prior experience in QuickBooks myself, I took on the role of helping her navigate this new software. However, I quickly discovered a significant hurdle: the co-mingling of personal and business expenses.

Upon reviewing the financial records, it became evident that my client, Liz, was paying personal bills directly from her business account. This included substantial expenses such as her mortgage, utility payments, IRA contributions, and even gym memberships, in addition to legitimate business-related costs like pest control and landscaping supplies.

To illustrate the situation, here’s a simplified breakdown of what her expenses looked like last month:

| Expense | 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 began to pull these records into QuickBooks, the mix of personal and business expenses stood out starkly. While payments for pest control and fertilizers are clearly business-related, expenses for her home mortgage and utility bills raise important questions about co-mingling funds.

It became clear that Liz was treating her business account as a personal piggy bank, which complicates the Accounting landscape substantially. For instance, when I inquired whether the SIMPLE IRA payment was an employer contribution, I learned it was her personal contribution, additionally charged to her business account.

This discovery prompted me to ask: what should I do in this tangled financial situation? Should I insist that Liz separate personal expenses from her business transactions? Or is there another solution to help accurately reflect these transactions in QuickBooks?

While it’s tempting to label the personal expenditures as “Owner