Navigating Client Co-Mingling in QuickBooks: A Guide for New Bookkeepers

It’s a common scenario in the world of small businesses: a dedicated professional leaves their role, and in steps someone new, ready to embrace the challenge of managing the books. Recently, a friend of mine faced this exact situation when their long-time assistant/bookkeeper retired. The company had been maintaining their financial records manually for the last decade, and they were looking for someone to transition them to QuickBooks.

Intrigued by the opportunity, I decided to take on the project. However, what I discovered was a complex web of financial entanglements that left me feeling overwhelmed. The situation revolves around a landscaping business, and from what I’ve gathered, the owner, Liz, has been charging several personal expenses to the business account.

Understanding the Co-Mingling of Funds

As I delved into the transaction records, it became evident that significant personal expenses were intermixed with legitimate business costs. For example, the business account was being used for:

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

The majority of these expenses bear no relation to the business operations, which raised a major concern about proper financial management. Here’s a snapshot of a typical month’s transactions:

| Transaction | 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 the first few entries for pest control, fertilizing, and nursery supplies are indisputably business-related, expenses such as the mortgage and cable bills present troubling co-mingling issues. Moreover, I discovered that the SIMPLE IRA contribution was actually a personal investment paid from the business funds, further complicating the Accounting landscape.

Tackling the Co-Mingling Challenge

Faced with this co-mingling dilemma, my first instinct was to seek clarification from Liz and the retiring admin. However, this approach met with confusion and a bit of annoyance. They were accustomed to their informal record-keeping and didn’t seem to appreciate