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

Recently, I had the opportunity to assist a friend whose long-time bookkeeper had retired. She was seeking guidance on transitioning to QuickBooks after a decade of maintaining financial records manually. Eager to embrace this challenge, I stepped in—only to find myself grappling with unexpected complexities.

The business in question is a landscaping company, and as I delved deeper into their financial practices, a concerning trend emerged. The owner, Liz, was using the business account to cover various personal expenses, including her mortgage, utility bills, IRA contributions, gym memberships, and even cable bills. These payments raised significant red flags about co-mingling personal and business finances.

To illustrate, here’s a sample of transactions I encountered:

• 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 pest control, fertilizer, and nursery transactions clearly aligned with business operations, the inclusion of the mortgage, cable, and cell phone bills indicated a distressing overlap of business and personal expenses.

Upon inquiring about the SIMPLE IRA contribution, I learned that it was not an employer deposit, but rather Liz’s personal investment funded through the business account—an alarming revelation that further complicated the financial landscape.

Faced with this co-mingling dilemma, I found myself at a crossroads. Should I approach Liz about re-structuring her expense reporting, or should I categorize these personal expenses as an “Owner Draw” in QuickBooks? My attempts to discuss these issues with Liz and her retiring assistant were met with confusion and irritation, as they were accustomed to their old record-keeping methods and seemed unaware of the implications of their practices.

So, what’s the way forward? Am I overreacting to what could be seen as a simple oversight? Is this a legitimate Accounting challenge? If so, how can I accurately and effectively manage these mixed transactions within QuickBooks?

The reality is that maintaining clear boundaries between personal and business expenses is crucial for any business owner. It not only ensures accurate financial reporting but also prevents potential legal and tax complications down the line. As I navigate this learning curve, my