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

Recently, I found myself stepping into an unexpected role when a friend sought assistance with their company’s Bookkeeping after their long-time assistant retired. Although I had minimal experience with QuickBooks, I was eager to learn and took on the challenge. However, it quickly became apparent that I had much more to handle than anticipated.

The business in question, owned by Liz, is a gardening and landscaping company. For the past decade, Liz and her bookkeeper meticulously recorded financial transactions by hand. Now, transitioning to QuickBooks, I discovered some significant issues, particularly regarding the mixing of personal and business expenses.

Upon reviewing the company’s financial records, I noticed that Liz had been using her business account for a variety of personal expenditures. These included mortgage payments, utility bills, IRA contributions, gym memberships, and even cable services. For context, here’s a snapshot of the company’s expenses for a typical month:

| Vendor | Amount |
|—————–|———|
| Bob’s Pest Control | $1,000 |
| Jill’s Fertilizing | $600 |
| Insurance Company | $3,000 |
| Ed’s Nursery | $2,000 |
| Chase Bank (Mortgage)| $3,500 |
| Comcast | $200 |
| AT&T | $200 |
| SIMPLE IRA | $4,000 |

As I began categorizing these transactions in QuickBooks, it became clear that while certain charges—like pest control and fertilizer—were legitimate business expenses, others such as the mortgage, utility payments, and personal IRA contributions signified a major co-mingling of funds.

During a discussion with the retiring admin, I inquired whether the SIMPLE IRA payment qualified as an employer contribution. To my surprise, she clarified that it was Liz’s personal contribution, also charged to the business account.

This situation raises a critical question: how should I address this inconsistency? Should I insist on establishing a clearer separation of business and personal expenses? Additionally, how should I account for these expenditures in QuickBooks?

Despite my attempts to clarify these matters with Liz and the retiring admin, they seemed perplexed or even irritated by my inquiries. They were accustomed to their handwritten record-keeping and simply passing documents to their accountant without scrutiny.

Am I overreacting to this situation? Is this a legitimate concern? More importantly,