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

Recently, I took on a project that has illuminated a common challenge faced by many small business owners: effectively managing co-mingled expenses in Accounting Software. A close friend, who runs a gardening and landscaping business, sought assistance after their long-time bookkeeper retired. Having an interest in mastering QuickBooks, I stepped in to help. However, I quickly discovered that the financial situation was more complicated than I initially anticipated.

The Co-Mingling Conundrum

The business owner, whom I’ll refer to as Liz, has been using a manual ledger to track her finances for the past decade. Upon reviewing the transactions, it became apparent that several personal expenses were being paid from the business account. These included significant costs such as:

• Mortgage payments
• Utility bills
• IRA contributions
• Gym memberships
• Cable and phone services

In comparison, legitimate business expenses included payments to pest control, fertilizer suppliers, and nurseries. While some entries are clearly business-related, others represent a significant co-mingling of personal and business finances.

Understanding the Transactions

To illustrate, here’s an example of a typical monthly transaction list sorted from their records:

| Vendor | Amount |
|—————————|———|
| Bob’s Pest Control | $1,000 |
| Jill’s Fertilizing | $600 |
| Insurance Company | $3,000 |
| Ed’s Nursery | $2,000 |
| Chase Bank (Mortgage) | $3,500 |
| Comcast | $200 |
| AT&T | $200 |
| SIMPLE IRA | $4,000 |

Most of these expenses, such as pest control and fertilizing, are clearly business-related. However, payments for the mortgage, insurance, utilities, and personal IRA contributions stand out as problematic.

Seeking Solutions in QuickBooks

As I began to input these transactions into QuickBooks, the issues became increasingly apparent. The retiring bookkeeper had never differentiated between personal and business expenses, leading to a muddled financial landscape. My initial impulse was to speak with Liz and the outgoing admin to clarify these transactions, but their responses suggested a reluctance to unravel the status quo. They seemed confused and annoyed by my inquiries, choosing to rely on their accountant to interpret their handwritten ledger.

This raises an important question: What should I do about