Navigating Co-Mingling Issues in QuickBooks: A Guide for Garden and Landscaping Businesses

In the world of small business Accounting, it’s not uncommon to encounter challenges that can leave even the most seasoned bookkeepers scratching their heads. One such instance recently came to my attention when a friend sought my assistance in transitioning her business records to QuickBooks. After a decade of keeping their books manually, both she and her retiring bookkeeper were grappling with how to accurately record expenses in a digital format. Little did I know that I was stepping into a complex scenario—one that involved significant co-mingling of personal and business expenses.

Understanding the Situation

The business in question, owned by a client named Liz, is a gardening and landscaping enterprise. Upon reviewing the records, it became evident that Liz was using her business account for a range of personal expenses. These included not only typical business costs like pest control and nursery supplies but also large personal obligations such as mortgage payments, utility bills, gym memberships, and more.

A snapshot of a typical month in their finances reveals the following transactions:

• 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 some of these expenses are certainly legitimate business costs, many—like the mortgage and utility payments—clearly fall into the personal category. This co-mingling poses significant challenges when it comes to accurate Bookkeeping and tax reporting.

Assessing the Risks

Co-mingling personal and business funds can have serious repercussions, including complications during tax season and potential issues with the IRS. It can blur the lines between business and personal finances, making it difficult to determine the actual profitability of the business. Not to mention, it puts the business owner at risk for unintentionally scuttling tax advantages available to them.

Finding a Solution

So, what steps should you take to address this co-mingling issue in QuickBooks? Here are some actionable recommendations:

1. Create Separate Accounts: The first step is to have Liz open separate business and personal bank accounts. This separation is crucial for clear financial tracking.

2. Classify Expenses Appropriately: For transactions already recorded, you could classify