Navigating Client Co-Mingling Issues in QuickBooks: A Beginner’s Guide

It’s not uncommon for business owners to mix their personal and professional expenses, particularly when transitioning from manual Bookkeeping to a digital platform like QuickBooks. A recent experience with a new client highlighted this very issue, and I found myself grappling with how to manage co-mingled accounts effectively.

The Background

A friend of mine, who recently lost her long-time assistant and bookkeeper to retirement, enlisted my help in transitioning to QuickBooks. Their business, a landscaping and gardening operation, had been maintaining financial records by hand for the past decade. Eager for a new challenge, I accepted, only to quickly realize I had taken on more than I bargained for.

The Challenge

As I delved into their records, it became evident that the owner, Liz, had been using the business account to cover significant personal expenses. Some of these expenditures included:

• Mortgage payments
• Utility bills
• Contributions to her retirement account (IRA)
• Gym memberships
• Cable services

While bills from pest control and nurseries clearly represent legitimate business expenses, others, such as home utilities and personal insurance, raise red flags about financial co-mingling.

Example of Expenses

For context, here’s a snapshot of what a typical month looks like in Liz’s financial books:

• Bob’s Pest Control: $1,000
• Jill’s Fertilizing: $600
• Home & Auto Insurance: $3,000
• Ed’s Nursery: $2,000
• Chase Bank (Mortgage): $3,500
• Comcast: $200
• AT&T: $200
• SIMPLE IRA: $4,000

As I transferred these records into QuickBooks, it became clear that all these transactions were drawn from the same business account. The legitimate business costs were overshadowed by personal expenses, such as the mortgage and utility bills, creating a significant Accounting headache.

Seeking Clarity

In a bid to sort things out, I spoke with Liz and the retiring administrator. Surprisingly, they seemed perplexed and somewhat irritated by my inquiries. Their method of simply recording everything in a handwritten ledger and passing it off to an accountant had worked for them until now. However, transitioning to QuickBooks requires a more structured approach.

One point of confusion was the SIMPLE IRA contribution, which the former admin clarified was a personal contribution—not an employer expense—yet it was still being