Navigating Co-Mingling Issues in QuickBooks: A Guide for Landscapers

A common challenge for small businesses, especially those transitioning from manual Bookkeeping to digital Accounting Software like QuickBooks, is managing co-mingling of personal and business expenses. A recent situation I encountered underscores the importance of recognizing and addressing this problem effectively.

The Background

A friend reached out to me for help after their assistant and bookkeeper unexpectedly retired. After keeping financial records by hand for nearly a decade, they were ready to adopt QuickBooks but needed guidance to navigate this new system. I welcomed the opportunity, believing I could lend my support while also familiarizing myself with the software.

Discovering the Issue

Upon reviewing the financial records for a landscaping business owned by a client named Liz, I quickly noticed a concerning trend. It became apparent that numerous personal expenses were paid using the business account. These included significant payments such as:

• Mortgage payments
• Utility bills (e.g., Comcast and AT&T)
• Personal IRA contributions
• Gym memberships

For context, here’s a snapshot of what typical monthly transactions looked like:

| Description | 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 expenses for pest control and fertilizers clearly fall under business operations, other charges like the mortgage and utility bills raised flags about co-mingling.

Understanding the Implications

Co-mingling occurs when personal and business expenses are mixed, complicating financial reporting and tax compliance. In Liz’s case, the SIMPLE IRA contribution was a personal one, not an employer contribution, and it too was debited from the business account.

When I probed Liz and her retiring bookkeeper about these transactions, I was met with confusion and dismissal. They seemed accustomed to recording everything together in a ledger, trusting their accountant to sort out the discrepancies later.

Finding a Solution

So, what’s the best approach to rectify this situation in QuickBooks? Here are some steps to consider:

1. Segregate Expenses: It’s crucial