Navigating Co-Mingling Issues in QuickBooks: A Guide for Business Owners

Transitioning from a hand-written Accounting system to software like QuickBooks can be a daunting experience, especially for small business owners who have managed their finances the same way for years. Recently, I encountered a particularly complicated situation while assisting a friend with her gardening and landscaping business.

When her bookkeeper retired after many years of maintaining their financial records by hand, I stepped in to help manage the transition to QuickBooks. What I thought would be a straightforward learning opportunity quickly revealed itself to be a significant challenge.

Understanding the Co-Mingling Problem

As I delved into the books, it became evident that my client’s business account was not just for legitimate business expenses. Liz, the owner, was also using it to pay for various personal expenses that included:

• Mortgage payments
• Utilities
• IRA contributions
• Gym memberships
• Cable and phone bills

As a newcomer to QuickBooks, it was alarming to see how these personal expenses were intertwined with business transactions. Here’s just a snapshot of what the financial records looked like for a typical month:

| Vendor | 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 |

While numbers related to pest control, fertilizing, and nursery supplies are undoubtedly business-related, the mortgages and utilities raised red flags. The SIMPLE IRA, which the retiring admin confirmed as a personal contribution, was also being paid from the business account.

Seeking Clarity and Solutions

In the early days of my role, I sought to address these findings by engaging with both Liz and her retiring bookkeeper. However, my questions about the rationale behind these payments were met with confusion, as they had been accustomed to merely transferring handwritten records to their accountant without assessing the appropriateness of each entry.

This situation leaves me at a crossroads: Should I advocate for a separation of personal and business expenses, or is there a way to handle this within QuickBooks without causing disruption?

Steps Forward

To resolve this co-mingling