Reconciling bank accounts with mixed use

[Raydaw]

Hi. I'd be interested to know how others cope with the age-old issue of clients who use their personal accounts for business transactions (and vice versa). Do you enter all personal transactions, enter a lump sum of transactions or use a dummy bank account to record the business transactions?

[annella]

In the past I have setup categories/sub categories in the chart of accounts that seperate business from personal.

[Balanced Business Service]

Most of the people I work with, if they use their business for personal use it is usually an accident (grabbed the wrong card, in a hurry etc.). But either way, the business owner needs to be reminded that personal and business expenses should be separate. How can the business owner truly judge how the business is doing if the numbers aren't for the business only? There are so many scenarios here but if it were a sole proprietor, you could set up or use their draw account (which is an equity account). If, as a bookkeeper, you've told them and told them and they just keep doing it, there's not much else you can do. If you've informed them, you've done your part. Maybe their tax person can scare them into changing their ways! :-)

[hbplifestyle]

One of my clients that has multiple businesses sets up centers within the chart of accounts.

[Raydaw]

Most of the people I work with, if they use their business for personal use it is usually an accident (grabbed the wrong card, in a hurry etc.). But either way, the business owner needs to be reminded that personal and business expenses should be separate. How can the business owner truly judge how the business is doing if the numbers aren't for the business only? There are so many scenarios here but if it were a sole proprietor, you could set up or use their draw account (which is an equity account). If, as a bookkeeper, you've told them and told them and they just keep doing it, there's not much else you can do. If you've informed them, you've done your part. Maybe their tax person can scare them into changing their ways! :-)

Thanks for your help. Unfortunately it happens all too often in the UK with new business owners! I think as bookkeepers part of our role is to educate/guide business owners, so many have no previous experience of running a business and no idea how to properly record business transactions.

[Balanced Business Service]

Oh I totally agree! I've just heard bookkeepers expressing their frustration when they have a client that just keeps doing it anyway. If all you have to do is educate them and they actually do it...well, then you've got a great client on your hands! :-)

[Raydaw]

Now there's a good idea for another thread - What makes a great bookkeeping client!

[Tomekia Lloyd]

Hi,

If their business structures are LLC, I typically label it as an owner's draw, so that it has no bearing on the final numbers of their Profit Loss statement.

I would also formally write them a memo or letter reminding them that in the case of an audit, mixing of business and personal transactions can cause a judge to rule that the business is NOT an independent entity for debt purposes. Therefore, if sued, their personal assets can potentially be tapped.

[Balanced Business Service]

Absolutely Tomekia! Thank you. It amazes me how many companies take that risk. I agree with the educational aspect but I've just seen too many times the business owner is too busy to do it right until it's too late.

Love your latest Twitter by the way.

[Tomekia Lloyd]

Thank you. I have truly learned to cover my butt with some clients by putting things in writing. If there is a problem down the line, they will SWEAR you didn't tell them. New business owners can be the most arrogant, sometimes.