Navigating Client Co-Mingling Issues in QuickBooks: A Fresh Perspective
In the realm of small business Accounting, transitioning from manual record-keeping to software solutions can be a daunting task. Recently, I took on a project that forced me to confront a significant dilemma: client co-mingling of personal and business expenses.
A friend of mine reached out for assistance following the retirement of their long-time bookkeeper. After a brief interview, I found myself stepping into the role and quickly realized I had bitten off more than I could chew.
The business in question is a gardening and landscaping operation, and upon reviewing the financial records, it became apparent that the owner, Liz, was utilizing the business account to cover a multitude of personal expenses. The list raised several eyebrows—mortgage payments, utility bills, retirement contributions, gym memberships, and even cable subscriptions were among the charges flowing through the business’s financial veins.
For context, here’s a snapshot of typical monthly transactions:
| Description | 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 |
As I uploaded these records into QuickBooks, it became clear that Liz’s personal expenses were all too easily commingled with what should be legitimate business transactions. While the gardening services and pest control payments were undoubtedly relevant to the business, obligations like mortgage payments, insurance, and personal contributions to her SIMPLE IRA raised red flags.
When I questioned the retiring admin about these transactions, it was confirmed that the IRA contribution was indeed personal, yet paid from the business account. This left me grappling with the fundamental question: what steps should I take next?
The first instinct might be to suggest that Liz disentangle her finances—an initiative that might not sit well with her given their historical approach of tracking expenses manually. In terms of QuickBooks categorization, should I classify the personal expenditures as “Owner Draws”? Would that keep the Accounting clean, while also indicating a separation for future reference?
In discussions with Liz and her former admin, there was noticeable irritation and confusion surrounding my inquiries. They
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