Navigating Client Co-Mingling Issues in QuickBooks: Guidance Needed

Recently, I found myself stepping into a new role as a bookkeeper for a friend’s landscaping and gardening business after their long-time assistant retired. With the previous Bookkeeping handled manually for over a decade, I was excited to implement QuickBooks—albeit slightly apprehensive about this transition.

However, as I began to examine the financials, I quickly realized I might have bitten off more than I could chew. It appears that the business owner, whom I’ll refer to as Liz, has been purchasing a range of personal items through the business account, including significant expenses like mortgage payments, utility bills, retirement contributions, gym memberships, and even cable subscriptions.

Understanding the Financial Landscape

To illustrate, here’s a snapshot of what a typical month looks like in Liz’s Bookkeeping records:

• 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

Upon importing these records into QuickBooks, the problem becomes evident: these personal expenses have been mingled with legitimate business costs. While expenditures related to pest control and fertilizer clearly serve the business, payments for Liz’s mortgage, insurance, and personal phone plans raise red flags regarding financial propriety.

Compounding the issue, I learned from the retiring admin that the contributions to the SIMPLE IRA are, in fact, Liz’s personal contributions being processed through the business account.

Seeking Clarity and Solutions

Given this scenario, I’ve been grappling with a few critical questions. What is the best approach to rectify this co-mingling of personal and business finances? Should I categorize these personal expenses as an “Owner Draw” in QuickBooks? Or would a different course of action be more appropriate?

While I have attempted to discuss these concerns with Liz and the retiring assistant, they have responded with confusion and a hint of annoyance. They seem accustomed to the manual Bookkeeping system where everything blends together without scrutiny before reaching the accountant.

Finding a Way Forward

Am I overreacting to this situation, or is it indeed a substantial issue that warrants attention? If this is a genuine problem, what steps can I take to properly account for these mixed