Navigating Client Co-Mingling Issues in QuickBooks: A Guide for New Bookkeepers
Recently, I embarked on a new journey when a friend reached out for assistance with their business’s Bookkeeping needs. After a decade of maintaining financial records by hand, their assistant and bookkeeper decided to retire, sparking a transition into the world of QuickBooks. Seizing the opportunity to learn this popular Accounting Software, I eagerly accepted the role, but soon found myself in a challenging situation.
The business in question, a gardening and landscaping service run by a client named Liz, has been utilizing the business account for various personal expenses. Upon reviewing the records, it became evident that significant personal bills—such as the mortgage, utility payments, IRA contributions, and even gym memberships—were being charged to the same account where the business income was deposited.
To give you a clearer picture, here’s a breakdown of their recent monthly expenses:
| 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 services like pest control and fertilizing are undoubtedly valid business expenses, the inclusion of mortgage payments and personal utility bills in the same account raises significant concerns about financial co-mingling. Furthermore, I discovered that the SIMPLE IRA contribution, though classified as a business expenditure, was actually Liz’s personal investment, further complicating the financial picture.
In terms of next steps, I find myself grappling with how to appropriately address this situation in QuickBooks. Is it best to classify these personal expenses as “Owner Draws”? Or would a stricter separation of business and personal accounts be a more prudent approach?
Upon consulting both the retiring admin and Liz, I received mixed signals—confusion and annoyance seemed to be their response to my inquiries about these expenditures. They’re accustomed to a simple hand-written ledger method, relying on their accountant to decipher the financial details at tax time.
As I dive deeper into this issue, I ask myself: Am I overreacting? Is this a common problem? And importantly, how do I reconcile these discrepancies
No responses yet