Navigating Client Co-Mingling Issues in QuickBooks: A Guide for New Bookkeepers
Recently, I encountered a unique challenge while working with a client who has transitioned from manual Bookkeeping to QuickBooks. After her long-time assistant and bookkeeper retired, my friend sought help in migrating her records to this Accounting Software. Eager to learn and assist, I accepted the role, only to realize that I had stepped into a situation that required more expertise than I initially anticipated.
The business in question is a landscaping and gardening service with a complicated financial setup. The owner, Liz, has been mixing personal and business expenses, leading to significant co-mingling problems. This has resulted in her business account being used for a variety of personal expenditures, including mortgage payments, utility bills, IRA contributions, gym memberships, and cable services—expenses that clearly should have been kept separate.
To give you an idea of the financial landscape, a typical month for Liz’s business reveals the following transactions:
- 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
Examining these entries in QuickBooks made it apparent that all these payments were coming from the same business account. While expenses like pest control and fertilizer purchases are legitimate business costs, payments for personal obligations like mortgage, cable, and phone bills present a major co-mingling issue that could complicate Accounting significantly.
Upon discussing the SIMPLE IRA contribution with the retiring assistant, I learned that it is indeed a personal contribution made by Liz rather than an employer-sponsored deduction. This further muddled the distinction between business and personal finances.
As I pondered how to handle this situation, I couldn’t help but feel a bit overwhelmed. What approach should I take? Is it sufficient to classify these personal expenditures as “Owner Draws” in QuickBooks, or is there a more effective method to resolve this issue? Moreover, any attempts to clarify this with Liz and her assistant resulted in confusion, and sometimes even annoyance—after all, they had successfully maintained their records by hand for years and were accustomed to handing them off to an accountant without much
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