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

Recently, I took on a project to assist a friend’s gardening and landscaping business with their Accounting transition to QuickBooks after their long-time bookkeeper retired. While I was eager to learn and help, I quickly realized the complexities I was inheriting.

The Background: A Transition to Digital Accounting

For over ten years, the business owner, Liz, and her assistant had maintained their accounts manually. However, stepping into the digital realm of QuickBooks unveiled a significant challenge: an alarming co-mingling of personal and business expenses.

Identifying the Problematic Transactions

As I sifted through the financial records, the discrepancies became glaringly evident. Major personal expenses were being paid from the business account—everything from mortgage payments and utility bills to IRA contributions and gym memberships. Here are some typical monthly transactions I encountered:

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

While charges from vendors that directly provided services for the gardening business appeared legitimate, expenditures linked to personal living expenses painted a different picture altogether. Additionally, the contribution to the SIMPLE IRA was revealed to be a personal deposit rather than a business expense.

Finding Solutions in QuickBooks

Recognizing this mixture of personal and business accounts raised urgent questions about proper Accounting practices. I found myself at a crossroads—what steps should I take to resolve this co-mingling issue? Simply advising the client to separate personal from business expenses seemed inadequate, as the owner and her assistant expressed confusion and resistance to the inquiry.

One potential solution lies in QuickBooks’ ability to categorize expenses accurately. A practical approach might involve designating personal expenses as “Owner Draws.” This method allows for clearer delineation between business and personal finances, simplifying the process for the client while also maintaining transparency in the business Accounting records.

Seeking Guidance and Clarity

It’s pivotal to communicate the importance of maintaining separate accounts to Liz and her assistant, despite their long-standing accounting habits. This shift isn’t merely a preference but a necessity to ensure compliance and sound financial practice.

Ultimately, I’m left pondering