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

Recently, I took on a challenge that many bookkeepers face—helping a client transition from manual record-keeping to QuickBooks. My friend, whose assistant/bookkeeper had retired, found herself in need of assistance as she moved forward with this change. It’s been a decade since they had maintained their books by hand, and I thought I’d lend a helping hand by diving into QuickBooks.

However, I quickly encountered a significant predicament. As I delved into their financial records, it became evident that Liz, the business owner, was using her business account to cover numerous personal expenses. Items on her monthly accounts included mortgage payments, utility bills, IRA contributions, gym memberships, and more.

To provide some context, this is a gardening and landscaping business. A typical month’s record revealed a mix of legitimate business transactions and questionable co-mingling of funds:

| 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 payments made to service providers in the gardening industry appear to be reasonable business expenses, the inclusion of mortgage payments, cable bills, and insurance premiums raises serious concerns about financial ethics and Bookkeeping accuracy. The most alarming discovery was that the SIMPLE IRA mentioned was a personal contribution made by Liz, again drawn from her business account.

This situation leaves me pondering: How should I address these discrepancies? Simply put, I believe that the best course of action combines identifying these personal expenses as “Owner Draws” and encouraging the client to untangle their accounts. However, the challenge lies in gaining Liz’s understanding and cooperation, as both she and her retiring admin seem bewildered by these inquiries. After years of relying on a handwritten ledger, they have been accustomed to passing everything along to their accountant without a second thought.

I wonder if I might be overreacting. Is co-mingling personal and business expenses a common concern, and what steps should I take to properly account for them within QuickBooks?

For those facing similar issues, the key takeaway is the importance