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

Recently, I was approached by a friend who needed assistance transitioning her long-time hand-written Bookkeeping to QuickBooks after her assistant and bookkeeper retired. She had been managing her gardening and landscaping business’s finances by keeping meticulous records on paper for about a decade. Intrigued by the opportunity to learn QuickBooks, I stepped in, only to find myself facing a significant challenge.

Upon examining the financial records, it became clear that the client, whom I’ll refer to as Liz, had been using her business account for a range of personal expenses. The list included mortgage payments, utility bills, IRA contributions, gym memberships, and even cable services—definitely not typical business costs.

When reviewing a sample month’s transactions, the breakdown was revealing:

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

It was evident that while expenses linked to pest control, fertilizers, and nursery supplies were legitimate business transactions, a substantial amount of money was also going towards personal expenses. This raised a critical concern regarding co-mingling funds—the mixing of personal and business finances—which can cause complications in Accounting and financial reporting.

When I inquired whether the SIMPLE IRA contributions were company-funded, I was informed that it was, in fact, Liz’s personal contribution being drawn from the business account. This situation put me in a precarious position. What was my best course of action to address this?

Approaches to Co-Mingling Issues

1. Separate Personal and Business Accounts: The most straightforward solution would be to encourage Liz to create a separate bank account for her personal expenses. This is a fundamental practice every business owner should follow.

2. Recording Transactions in QuickBooks: For the time being, I can record the personal expenses in QuickBooks as “Owner Draws.” This designation will help keep track of the funds being taken for personal use while keeping the business Accounting cleaner.

3. Clear Communication: It’s vital to communicate the importance of accurate financial management. I’ve noticed the owner and the retiring admin appear confused or even annoyed by probing questions regarding these