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

Recently, I encountered a challenging situation that many new bookkeepers might face, particularly when transitioning from manual record-keeping to a digital Accounting platform like QuickBooks. A friend of mine sought assistance after her bookkeeper retired, and my curiosity got the better of me. I applied for the role and, to my surprise, landed the job. However, I quickly realized I was navigating deeper waters than expected.

The client, whom I’ll call Liz, had been managing her gardening and landscaping business using a handwritten ledger for the past decade. While this method worked for her, the transition to QuickBooks revealed a significant problem: co-mingling of personal and business expenses.

Throughout the process of entering Liz’s financial data, it became evident that numerous personal expenses were being charged to the business account. These included substantial bills like the mortgage, utilities, IRA contributions, and even gym memberships. To illustrate, here’s a snapshot of her typical monthly expenditures:

| Vendor | Amount |
|——–|——–|
| Bob’s Pest Control | $1000 |
| Jill’s Fertilizing | $600 |
| Insurance Company (Home & Auto) | $3000 |
| Ed’s Nursery | $2000 |
| Chase Bank (Mortgage) | $3500 |
| Comcast | $200 |
| AT&T | $200 |
| SIMPLE IRA | $4000 |

As I analyzed these transactions, it was clear that while payments to the pest control and gardening suppliers were legitimate business expenses, the mortgage and personal utilities painted a troubling picture of co-mingling funds. I discovered that the SIMPLE IRA payments were Liz’s personal contributions rather than employer contributions, further complicating matters.

Navigating the Co-Mingling Maze

Faced with this tangled web of expenses, I grappled with how to approach the situation. Should I advise Liz to separate her business and personal finances? Or is it acceptable to adjust how these transactions are recorded in QuickBooks?

After attempting to clarify these transactions with Liz and her retiring bookkeeper, I was met with confusion and defensiveness. The duo seemed accustomed to their traditional ledger system, and it felt like my inquiries were unwelcome.

So, what’s the best way to handle this co-mingling issue in QuickBooks? Here are a few strategies I considered:

1. Classify Personal Transactions as Owner Draws: Given that many of these