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

Recently, I was approached by a friend whose business assistant and bookkeeper had just retired. They had been diligently keeping records by hand for over a decade, and now my friend was looking to transition to QuickBooks for better financial management. Feeling adventurous and eager to learn, I decided to step in and help. However, I quickly realized I might have bitten off more than I could chew.

The client I am working with, Liz, has been using her business account for a range of personal expenses. These expenses include significant payments like her mortgage, utilities, retirement contributions, gym memberships, and more. Historically, these transactions were documented by hand, but as I began transitioning to QuickBooks, red flags started to surface.

For context, Liz runs a gardening and landscaping business. Here are some typical monthly transactions I encountered:

| 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 started entering this data into QuickBooks, it became evident that there was a significant co-mingling of personal and business expenses. While the payments to pest control, fertilizing services, and nurseries clearly qualify as business-related expenses, everything else—especially the mortgage, utility bills, and insurance—posed a serious problem.

To complicate matters further, when I inquired about the SIMPLE IRA contribution, the response was that it was Liz’s personal payment made from the business funds.

This situation left me wondering: how should I manage these mixed expenses in QuickBooks? Is my best course of action to categorize these personal costs as an “Owner Draw”?

Unfortunately, when I discussed these issues with Liz and her retiring assistant, their reactions were less than favorable. They seemed either annoyed or confused, as they were accustomed to simply recording everything in the ledger and handing it over to their accountant for clarification.

So, I ask: Am I overreacting, or is this a genuine concern that needs addressing? If this is indeed an