Navigating Client Co-Mingling Issues in QuickBooks: A Guide for New Users
When stepping into the world of Accounting Software like QuickBooks, especially in a small business setting, you might encounter challenges that aren’t readily apparent at first. One such challenge is the issue of co-mingling personal and business expenses. Recently, I experienced this firsthand while assisting a friend who was transitioning from manual Bookkeeping to QuickBooks for her gardening and landscaping business.
My friend, Liz, had relied on her assistant/bookkeeper for over a decade, but with their retirement, she needed assistance in digitizing her records. I eagerly volunteered to help, thinking it would be a great opportunity to familiarize myself with QuickBooks. However, I quickly found myself in deeper waters than I anticipated.
As I started pulling reports into QuickBooks, a concerning pattern emerged: Liz was using her business account to cover a range of personal expenses, including her mortgage, utilities, gym memberships, and more. Take a look at a typical month’s transactions:
| Vendor/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 |
In reviewing these transactions, it was clear that while some were legitimate business expenses—like pest control and fertilizer—the considerable charges for the mortgage, phone, and cable were not. Even more troubling was the SIMPLE IRA payment—not as an employer contribution but as a personal contribution made using the business funds!
Faced with this situation, I was left wondering how to approach the Accounting accurately without straining my relationship with the client. Should I record these personal expenses as “Owner Draws” in QuickBooks, or is there a better way to address this?
I attempted to discuss my concerns with Liz and the retiring assistant, but they seemed either annoyed or confused about the questions. They were accustomed to recording everything in a handwritten ledger and passing it to their accountant—a practice that clearly needed reevaluation in light of the transition to digital Accounting.
So, am I overreacting? Is this just a normal hiccup in the accounting process?
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