Navigating Co-Mingling Issues in QuickBooks: A Practical Guide for Business Owners

Recently, I took on a new challenge when a friend sought assistance with transitioning her gardening and landscaping business to QuickBooks. After a decade of hand-written Bookkeeping, the business faced a significant turning point following the retirement of its long-time assistant. Eager to step in and learn the ropes of QuickBooks, I accepted the role—only to find myself confronted with a complex co-mingling issue that could have far-reaching implications on the business’s financial health.

As I dived into the financial records, I discovered several personal expenses being charged to the business account. This included items that, quite frankly, should have remained separate, such as:

• Mortgage payments
• Utility bills
• Gym memberships
• Cable services

To illustrate, a typical month for the business often looked like this:

• 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 (personal contribution): $4,000

It quickly became apparent that while expenses like pest control or garden supplies could be categorized as legitimate business costs, the mortgage, utilities, and other personal expenditures represented a significant co-mingling problem. Not only does this practice blur the lines between personal and business finances, but it also creates potential legal and tax complications.

When I probed the retiring administrator on whether the SIMPLE IRA contribution was an employer-sponsored plan, she clarified that it was actually Liz’s personal contribution, which had been erroneously processed through the business’s funds.

This dilemma raised a crucial question: how should I manage these expenses in QuickBooks? The most straightforward solution seems to be categorizing the personal payments as “Owner Draws.” This would help differentiate between business expenditures and personal costs, ensuring cleaner financial records.

However, my attempts to discuss these concerns with Liz and her former assistant were met with confusion—perhaps even annoyance. Their long-standing method of tracking everything in a manual ledger had ingrained a particular mindset about financial management that now needed reevaluation.

So, what do I do moving forward? Am I perhaps overreacting, or is this truly a significant