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

When stepping into the world of Bookkeeping, especially with a robust system like QuickBooks, it can quickly become apparent that there are complexities to juggle—particularly when it comes to managing client finances. I recently found myself in a challenging situation with a new client, and I wanted to share my experience in hopes that it may assist others tackling similar dilemmas.

The Background

A friend of mine reached out when their long-time bookkeeper retired. Their client, Liz, had been managing her gardening and landscaping business by hand for over a decade. As someone eager to learn and tackle new challenges, I took on the task of transitioning her financial records into QuickBooks.

However, upon diving in, I quickly realized that I had entered murky waters. The most glaring issue was the blending of personal and business expenses within the same account—a significant concern in Accounting practices.

Identifying the Problem

Liz was using her business account to pay for a range of significant personal expenses. A brief overview of the expenses categorized shows the mix:

| Vendor | 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 |

While payments for pest control and fertilizer clearly relate to Liz’s business, items like mortgage payments and utility bills raise red flags concerning co-mingling. Furthermore, upon inquiry, I learned that the SIMPLE IRA contribution was purely personal, once again paid from the business account.

Seeking Solutions

Confronted with this scenario, I felt the weight of the responsibility on my shoulders. It prompted me to ask: What is the best way to handle these personal expenses within a business Accounting framework? I considered the following possibilities:

1. Owner’s Draw: Treating personal expenditures that should be separated from business operations as an “Owner Draw” in QuickBooks is one viable approach. This allows you to categorize these expenses appropriately while keeping business finances clear.

2. Communication: Despite my attempts to clarify the necessity of distinguishing these