Title: Navigating Client Co-Mingling Issues in QuickBooks: A Guide for Small Business Owners
Are you a small business owner grappling with the complexities of Bookkeeping, especially after a transition in your administrative staff? A friend recently reached out to me with a significant concern after her assistant retired. Although they had been manually maintaining their financial records for a decade, the time had come to embrace QuickBooks for a more efficient Accounting solution.
Upon stepping in to help, I quickly realized that I was facing a daunting challenge. The client, Liz, had been using her business account for a variety of personal expenses, which raised some serious questions about financial management. Expenses like mortgage payments, utility bills, IRA contributions, gym memberships, and cable subscriptions were all being drawn from the business account.
To provide some context, Liz runs a gardening and landscaping business. In reviewing her transactions, I noticed a blend of both legitimate business expenses and significant personal charges. For instance, while payments to suppliers like Bob’s Pest Control and Ed’s Nursery clearly align with her business activities, the payments for her home mortgage, Comcast cable, and AT&T phone plan did not.
Here’s a snapshot of typical monthly transactions I encountered:
| Transaction | 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 |
It became clear that co-mingling business and personal expenses is a recurring issue. For example, the SIMPLE IRA contribution I inquired about turned out to be a personal contribution, not an employer sponsorship, which further complicates matters.
As I attempted to address these discrepancies with Liz and her retiring assistant, I was met with confusion and annoyance. They are accustomed to logging everything in a handwritten ledger and subsequently passing it along to their accountant, who would resolve the issues later in the process. However, this approach can lead to significant risks and complications.
So, where do we go from here? Is it reasonable to suggest that Liz separate her personal expenses from her business account? My instinct is to categorize these personal charges as “Owner Draws” in QuickBooks
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