Navigating Client Co-Mingling Issues in QuickBooks: A Guide

Recently, I found myself stepping into the world of QuickBooks after a friend asked for assistance with her small business’s Bookkeeping. After their long-time assistant retired, they needed help transitioning from a manual system to the digital realm. Eager to learn and lend a hand, I took on the challenge, only to quickly realize the complexities I was diving into.

The business in question is a gardening and landscaping company, and upon reviewing their financial records, it became clear that there were significant issues with co-mingling personal and business expenses. Over the past decade, they had been maintaining a handwritten ledger to track their finances, but now, as we transitioned to QuickBooks, the disparities became glaringly apparent.

Understanding the Problem

The client’s records revealed various costly personal expenditures being charged to the business account. Here’s a glimpse into a typical monthly breakdown:

| Vendor/Expense | 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 |

While it’s easy to identify the first three expenses as legitimate business costs—pest control, fertilizing, and nursery supplies—the inclusion of personal expenses like the mortgage, utilities, and even IRA contributions raised a significant red flag for me.

Moreover, when I inquired about the SIMPLE IRA contribution, it turned out that this was Liz’s personal investment rather than an employer contribution.

The Dilemma

Faced with this co-mingling of expenses, my question became: What should I do to ensure accurate Accounting in QuickBooks? Should I request that the client delineate their personal from business expenses entirely? Or is there a simpler solution I could implement?

Despite my attempts to engage both the client and the retiring assistant, I was met with confusion and annoyance when I broached the topic. They had always relied on their handwritten system, turning everything over to their accountant without much scrutiny—or so they thought.

Seeking Solutions

So, am I overreacting, or is this a legitimate concern? I believe it’s