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

When stepping into the world of Bookkeeping, especially after years of manual record-keeping, one can quickly find themselves in unfamiliar territory. Recently, I took on a project for a friend whose assistant had retired, leaving her in need of someone to help transition her gardening and landscaping business to QuickBooks. Although I was eager to learn, I soon discovered that I was faced with a significant challenge involving co-mingling of business and personal expenses.

Over a decade, my friend Liz had been managing her finances by writing everything down by hand, but now, as I began entering records into QuickBooks, a concerning pattern emerged. It became apparent that many personal expenses were being charged to the business account—expenses such as the mortgage, utilities, IRA contributions, gym memberships, and even cable bills. To illustrate the issue, here’s a breakdown of typical monthly transactions in her business:

| Service Provider | 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 |

As I reviewed these transactions in QuickBooks, it became clear that only a few—such as payments to pest control and fertilizers—could rightfully be considered legitimate business expenses. The other charges, including the mortgage payment and various bills, raised major concerns regarding financial co-mingling.

In my investigation, I even learned that the SIMPLE IRA contribution was Liz’s personal payment, not an employer contribution, yet it was still being pulled from the business account. Naturally, this left me scratching my head about how to accurately represent these transactions in QuickBooks.

My initial thought was to record these personal expenses as “Owner Draws” to clarify the distinction between business costs and personal expenditures. However, I ran into resistance from both Liz and the retiring assistant, who did not seem to understand the need for this separation. They’ve relied on their handwritten ledger for years, simply passing it along to an accountant for tax preparation.

This leads to a crucial question: Am I overreacting, or is this a legitimate issue that needs addressing? If you find yourself in a similar