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

Dealing with Bookkeeping can be a daunting task, particularly when transitioning from traditional record-keeping methods to a digital system like QuickBooks. Recently, I took on the responsibility of assisting a gardening and landscaping business whose owner, Liz, was facing complications after her long-time assistant retired. The challenge? Liz has been utilizing her business account to cover a significant amount of personal expenses, leading to potential co-mingling issues that could create Accounting headaches.

Understanding Co-Mingling Issues

Co-mingling refers to the blending of personal and business finances, which can lead to several complications, especially during tax season. In the case of Liz’s business, I discovered that along with legitimate business expenses—such as pest control, fertilizer, and nursery supplies—Liz’s accounts included payments for:

• Mortgage
• Utilities
• IRA contributions
• Gym memberships
• Cable bills

The previous Bookkeeping method involved hand-written ledgers, which makes it even tougher to decipher which expenses were personal and which were business-related.

Breakdown of Expenses

As I started inputting these transactions into QuickBooks, I noticed a mix of entries that raised red flags. Here’s a simplified snapshot of a typical month’s expenses:

| 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 |

Items like pest control and gardening supplies clearly support the business’s operations. However, items such as the mortgage and personal utility bills indicate a problematic mix of private and professional finance.

Seeking Solutions

In my attempts to clarify the situation with both Liz and her retiring assistant, I faced confusion and annoyance. This could be attributed to their accustomed method of simply recording all transactions on paper and leaving the complexities of categorization to their accountant.

So, where do I go from here? The logical step would be to separate these personal expenses from the business account to maintain clearer financial records. One potential solution in QuickBooks would be to categorize personal expenses as “Owner Draw