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

Recently, I took on a project to help a friend’s client transition from manual Bookkeeping to QuickBooks. The client, Liz, had maintained her financial records by hand for over a decade, and with her assistant/bookkeeper retiring, she found herself in need of assistance. I was eager to learn and accepted the challenge, but it soon became apparent that I had bitten off more than I could chew.

Upon diving into the accounts, I discovered some concerning practices. Liz was using her business account for various personal expenses—including significant payments like her mortgage, utilities, IRA contributions, gym memberships, and cable bills. This raised a red flag regarding co-mingling of funds, a common pitfall for small business owners.

To paint a clearer picture, here’s a snapshot of her expenditures for a typical month:

| 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 |

As I sorted through Liz’s records in QuickBooks, it was evident that business and personal expenses had been intermixed within the same account. The payments to Bob’s Pest Control and Jill’s Fertilizing seemed appropriate for a gardening and landscaping business; however, the expenditures for her home mortgage and personal utilities raised significant concerns.

Particularly interesting was the payment for the SIMPLE IRA. When I inquired if this was a contribution made by the business on behalf of the employee, the answer was no; Liz was funding her personal IRA directly from the business account.

This situation posed a question: What’s the best approach to rectify this issue? Simply advising Liz to separate her personal and business expenses feels inadequate. Should I categorize the personal payments as “Owner Draws” in QuickBooks?

Despite my attempts to clarify these concerns with both Liz and her retiring assistant, I was met with confusion and annoyance. They were accustomed to recording everything in their handwritten ledger and then turning it over to an accountant without question.

Am I overreacting to