On this episode of The Roadmap, Ted Jenkins is joined by Elizabeth Elrod, CEO of Decimal Bookkeeping, to explore the world of business accounting and bookkeeping. From her unique start in the industry to her insights on setting up proper financial systems for small businesses, Elrod breaks down the key strategies every business owner needs to know. Whether you’re just starting out or looking to improve your financial processes, her expertise offers invaluable guidance.
Elrod’s journey started with a childhood inspiration that eventually led her to establish her own bookkeeping business. She first became interested in accounting after being impressed by a cousin’s friend who worked in the field. She then switched her college major and pursued a business degree with a focus on accounting, eventually working in public accounting for 15 years.
After experiencing the grueling tax season, Elrod decided to transition into bookkeeping, where she could leverage her expertise while maintaining a better work-life balance. She now helps small business owners ensure their financial records are clean and organized, preventing costly mistakes down the road.
Elrod explains the differences between bookkeeping and tax preparation, noting that while tax returns are important, many business owners often fail to keep accurate books. She emphasizes the importance of having organized financial records, even for small businesses and sole proprietors, who may initially use simple forms like the Schedule C for taxes.
In discussing the right time to start bookkeeping, Elrod advises business owners to set up proper financial systems early, rather than relying on disorganized methods like using a shoebox for receipts. She also highlights how poor bookkeeping practices can harm a business when it comes time to sell, as potential buyers will scrutinize the general ledger for accuracy.
Nevertheless, Elrod highlighted a few common mistakes small business owners make, like misclassifying distributions as deductions, and shares her advice on payroll systems. To combat these mistakes, she recommends outsourcing payroll to services like ADP or Paychex to avoid potential IRS penalties and interest. Despite the proliferation of cheaper, lesser-known payroll options, she believes that the cost of reliable payroll services is a worthwhile investment.
“Business owners often think that if they move money from their business account to their personal account, that’s a distribution and they can deduct it from their P&L statement, which is a big mistake. Distributions are not deductions.” – Elizabeth Elrod
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