Navigating Co-Mingling Issues in QuickBooks: A Guide for New Users
Embarking on the journey of Accounting Software, especially QuickBooks, can feel daunting, particularly for those transitioning from manual Bookkeeping. Recently, I was approached by a friend who needed assistance after her long-time assistant/bookkeeper retired. She had relied on a handwritten ledger for nearly a decade, and now, she was eager to bring her gardening and landscaping business into the digital age.
When I took on this challenge, I quickly recognized the complexities involved. As I delved into her financial records, it became evident that the owner, Liz, was using the business account for a plethora of personal expenses. Charges included not only legitimate business costs but also items like mortgage payments, utilities, IRA contributions, gym memberships, and cable bills.
Here’s a snapshot of a typical month’s expenses:
| Vendor/Service | 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 imported this data into QuickBooks, the issue of co-mingling became glaringly apparent. While payments related to pest control, fertilizer, and nursery purchases align with business operations, personal financial commitments—such as the mortgage and various utility bills—do not belong in the business Bookkeeping. The SIMPLE IRA contribution, which was confirmed to be a personal payment rather than an employer contribution, was also a red flag.
In discussions with Liz and her retiring admin, I found them somewhat perplexed by my inquiries regarding these expenses. For years, they recorded everything in a simple ledger and then passed it off to their accountant for reconciliation. It was clear that they had little awareness of the implications of mixing personal and business funds.
So, where do I go from here? Is there a systematic way to address this issue within QuickBooks? The obvious solution involves separating personal transactions from business ones, but I know that could be a daunting task for Liz. Should I categorize these personal expense payments as “Owner Draws” in QuickBooks?
As I navigate this challenge, I grapple with whether I’m over
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