Navigating Client Co-Mingling Issues in QuickBooks

When it comes to Bookkeeping, especially for small businesses, maintaining clarity and organization is crucial. Recently, I was involved in a case that highlighted a common yet significant challenge: co-mingling personal and business expenses.

A friend approached me for assistance after her long-time assistant retired, leaving her in search of help with managing her books on QuickBooks. For nearly a decade, this business—a landscaping and gardening service—had relied on manual record-keeping. So, I thought, why not take the opportunity to learn QuickBooks and help out?

However, upon diving into the books, I quickly recognized that I had stepped into a complex situation. The owner, Liz, appeared to be withdrawing business funds for substantial personal expenses. These included payments for her mortgage, utility bills, IRA contributions, gym memberships, and cable services— all charged to the same business account.

To illustrate, here’s a breakdown of expenses recorded for a typical month:

| 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 expenses like pest control, fertilizer, and plants clearly relate to the business, the mortgage and utilities raise a red flag—pointing towards an issue of mixed finances.

One particular item that surprised me was the SIMPLE IRA payment. After consulting the retiring admin, I learned that this was not a business contribution but rather Liz’s personal investment, once again funded through the business account.

This led me to question the appropriate way to handle these transactions within QuickBooks. Should I categorize the personal expenses as “Owner Draws,” or is there a more effective method to address this concern? Attempting to clarify the situation with Liz and the former assistant only resulted in confusion, as they had become accustomed to their hand-written ledgers and passing everything off to an accountant for correction.

So, am I overreacting? Is this a serious issue that requires immediate attention? It certainly appears so. Mixing personal and business finances can lead