Navigating Co-Mingling Issues in QuickBooks: Strategies for Accountants

Recently, I was approached by a friend whose assistant/bookkeeper had just retired. She was seeking guidance on transitioning her financial records to QuickBooks after a decade of manually maintaining her accounts. Intrigued by the challenge, I volunteered to step in and help. However, I quickly realized that I was facing a significant hurdle.

The client, Liz, has been using her business account to pay for various personal expenses. These include large monthly obligations such as her mortgage, utilities, IRA contributions, gym memberships, and cable bills. Previously, these transactions were recorded in a handwritten ledger—an approach that now requires a more structured financial management system.

For context, Liz operates a gardening and landscaping business. A typical month’s expenses recorded in her account might look like this:

• Bob’s Pest Control: $1,000
• Jill’s Fertilizing: $600
• Home & Auto Insurance: $3,000
• Ed’s Nursery: $2,000
• Chase Bank (Mortgage): $3,500
• Comcast: $200
• AT&T: $200
• SIMPLE IRA: $4,000

Upon importing these records into QuickBooks, it became clear that personal and business expenses were being intertwined in the same account. While the payments to pest control, fertilizer suppliers, and nurseries seem justified as business expenses, those tied to home mortgages, cable, and phone services raise a significant co-mingling concern.

I inquired with the retiring bookkeeper whether the SIMPLE IRA payments were employer contributions; however, she clarified that they were Liz’s personal contributions, made from the business account.

This situation leaves me pondering my next steps. Should I insist that the client segregate her personal and business expenses? Or is there a simpler solution? Would categorizing the personal expenses as an “Owner Draw” in QuickBooks suffice?

I’ve attempted to discuss these issues with both Liz and the retiring bookkeeper, but they seem confused and somewhat irritated by my inquiries. They are accustomed to their system of recording everything by hand and then handing over the compiled information to their accountant for review.

Am I overreacting to this situation? Is this a genuine concern in the realm of Accounting? If so, what best practices should I adopt to appropriately manage and categorize these transactions within QuickBooks?

As I navigate this challenge, I realize the importance of establishing clear financial boundaries between personal and business finances