Navigating Client Co-Mingling Issues in QuickBooks: A Guide for New Users

If you’re new to QuickBooks, you might find yourself facing unexpected challenges, particularly when dealing with co-mingled personal and business expenses. Recently, I took on a project to assist a friend who was transitioning from handwritten records to this popular Accounting Software. Little did I know that I was stepping into a complex minefield of expense management.

Understanding the Scope of the Issue

My friend, Liz, had relied on her assistant/bookkeeper for nearly a decade, but with their retirement, it was time to modernize her gardening and landscaping business’s financial practices. As I delved into the existing records, I quickly recognized that the business account had been used for a plethora of personal expenses, including:

• Mortgage payments
• Utility bills
• Gym memberships
• Cable and phone services
• IRA contributions

This haphazard Accounting system, which was previously managed in a handwritten ledger, posed significant challenges when importing records into QuickBooks.

Analyzing the Transactions

In reviewing a typical month’s transactions for Liz’s business, the mix of legitimate business expenses and personal costs became alarmingly apparent. For instance, the ledger included payments for:

| Transaction | 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 the payments to pest control, fertilizing, and the nursery seemed justified as business expenses, the home mortgage and utility bills raised significant co-mingling concerns. Even more troubling was the revelation that Liz’s IRA contributions were being deducted from the business account despite being personal in nature.

Seeking Clarity and Solutions

As I sought guidance from Liz and her retired admin about the rationale behind these transactions, I was met with confusion and annoyance. They’d always kept their records manually and relied on their accountant to sort everything out at tax time.

This raised an important question: What should I do about these discrepancies in QuickBooks? Should I treat the personal expenses as an “Owner Draw”?

Finding the