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

Recently, a friend of mine faced a challenge when their long-time assistant/bookkeeper retired. With over ten years of keeping the business’s financial records manually, the transition to using QuickBooks was daunting. I decided to step in and learn the software as we tackled this task together.

However, I quickly discovered that this was no simple task. My client, Liz, was unexpectedly paying for significant personal expenses directly from her business account. These expenses included mortgage payments, utility bills, IRA contributions, gym memberships, and cable services, just to name a few.

To provide some context, Liz operates a gardening and landscaping business. A typical month’s transactions looked something like this:

| Vendor | 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 |

As I began importing this data into QuickBooks, it became evident that all these transactions were being drawn from the same business account. The payments to pest control, fertilizers, and nurseries were clearly business-related; however, the home mortgage and utility bills raised significant concerns about co-mingling — the mixing of personal and business finances.

I addressed the situation with the retiring administrator, who confirmed that the SIMPLE IRA contributions were actually personal contributions made by Liz from the business funds. This raised an important question: What should I do about these transactions in QuickBooks?

Should I simply categorize personal expenses as “Owner Draw” entries, or do I need a different approach? Consulting with both Liz and the retiring admin yielded little clarity, as they appeared puzzled and somewhat annoyed by the inquiries. After years of operating with a handwritten ledger and passing it off to their accountant without issue, they seemed unsure of my concerns.

This leads me to ask — am I overreacting? Is this a legitimate concern? If so, how should I properly account for these transactions in QuickBooks?

Understanding the Impact of Co-Mingling

It’s crucial for business owners to understand the implications of co-mingling funds. Not