Navigating Client Co-Mingling Issues in QuickBooks

Recently, I embarked on an unexpected journey to assist a friend whose assistant/bookkeeper had retired after a decade of maintaining books by hand. The organization, a gardening and landscaping business, faced the daunting task of transitioning to QuickBooks, and I volunteered to help. However, I quickly found myself grappling with a significant issue: co-mingling of business and personal expenses.

The Co-Mingling Concern

On reviewing the financial records, it became evident that substantial personal expenses were being charged to the business account. This included payments for the mortgage, utilities, gym memberships, cable bills, and more. While I could identify legitimate business transactions—such as payments to pest control services, fertilizers, and nurseries—the inclusion of personal expenses raised red flags.

For example, a typical month included transactions such as:

• 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 started to input these records into QuickBooks, the full scope of the issue became apparent. Not only were personal and business expenses mixed together, but even the retirement contributions were being drawn from the business funds—something I later confirmed was a personal contribution, not an employer match.

Seeking a Solution

Faced with this challenge, I was left pondering the best course of action. While my initial thought was to request that my client segregate personal and business expenses, I also contemplated how to handle these transactions within QuickBooks.

My first inclination was to categorize the personal expenses as “Owner Draws.” This method would effectively separate personal expenditures from business transactions in QuickBooks, making it clearer for future Accounting tasks.

However, when I sought clarification from both the business owner and the retired administrator about these practices, I met with confusion and annoyance. They’ve been accustomed to keeping a hand-written ledger and delegating the financial complexities to their accountant at year-end.

Conclusion: A Call for Clarity

Understandably, transitioning to electronic Bookkeeping can be overwhelming, especially when existing practices blur personal and business lines. While co