Navigating Client Co-Mingling Issues in QuickBooks: A Guide to Proper Expense Management
Recently, I took on a new role assisting a friend whose longstanding assistant/bookkeeper had retired. My task was to help transition their manually-kept financial records into QuickBooks. While I was eager to learn and tackle this challenge, I soon found myself grappling with some significant issues pertaining to expense management.
The client, Liz, operates a gardening and landscaping business but has been utilizing her business account for several personal expenses. These expenses range from mortgage payments and utility bills to gym memberships and cable services—items that undoubtedly belong to her personal financial portfolio.
Historically, they’ve maintained all their financial records by hand, relying on a simple ledger system. As I began inputting their transactions into QuickBooks, it became clear that the line between business and personal expenses was heavily blurred. For instance, here are some typical transactions from a recent month:
- Bob’s Pest Control: $1,000
- Jill’s Fertilizing: $600
- Home & Auto Insurance: $3,000
- Ed’s Nursery: $2,000
- Mortgage to Chase Bank: $3,500
- Comcast: $200
- AT&T: $200
- SIMPLE IRA Contribution: $4,000
While expenses related to pest control, fertilizing, and nursery purchases are clear legitimate business operations, I raised concerns about the inclusion of mortgage payments, insurance costs, and even IRA contributions, which seem to represent a serious issue of co-mingling funds.
After inquiring with the retiring bookkeeper, I learned that the SIMPLE IRA was not an employer contribution but rather Liz’s personal contribution—yet it was being paid from the business account! This revelation left me in a quandary about how to accurately account for these transactions within QuickBooks.
What complicates matters further is Liz’s and her former assistant’s puzzlement over my inquiries. They have long relied on their handwritten records, seamlessly passing everything to their accountant for sorting.
So, where do we go from here? Should I simply classify all these personal expenses as an “Owner Draw” in QuickBooks? Is there a more effective way to segregate these transactions?
As I weigh my options, it’s clear this is not merely an oversight; it’s a legitimate issue that requires prompt attention. In terms of best practices in
No responses yet