Bookkeeping for Therapists

When a client pays you, it shows up as revenue in your general ledger. When you make a loan payment or pay rent for your office, it shows up as an expense. You can think of the “accounts” in your chart of accounts as financial categories. Professional liability insurance is generally considered an ordinary and necessary business expense for therapists. This insurance protects your practice against claims of negligence or malpractice while offering professional services. You can write off your professional liability insurance premiums on your tax return.

Bookkeeping Basics for Therapists

Therapists rarely have extensive financial or business training. They are very good at servicing clients but may need some help to address the business side of their business. Financial management, tax obligations, and cash management all require a thorough understanding of your practice and financial responsibilities—and a specialized accountant can help. However, many therapists have very little, if any, training or experience in financial planning and business maintenance. But that does not make maintaining and keeping books for your business any less important. In fact, more than half of all service businesses, including counseling practices, will fail within the first five years, with most citing cash flow as a grave issue.

Factors Affecting Profitability in Private Practices

For instance, an S-corp allows owners to draw a reasonable salary while also taking distributions, which can provide tax benefits. In summary, QuickBooks proves to be a highly beneficial tool for therapists looking to manage their finances efficiently. Its user-friendly interface, robust features, and strong integration capabilities make it a recommended choice for therapy practice accounting. When you bill a customer, you’ll need to manually enter it into accounts receivable using your accounting software. When you receive payment, the software should automatically import the transaction from your bank account. Most accounting software is able to connect to your bank account, automatically import transactions and—once you create rules for the software to follow—categorize them.

• At Therapeutic Tax Solutions, we understand the specific needs of therapists.
• You can also claim expenses on software used for invoicing or providing receipts.
• Nonetheless, it’s included below, in the sections for each accounting software option, in case you’re specifically looking for a tool that integrates with your EMR/EHR/practice management software.
• QuickBooks fits seamlessly into the broader context of accounting services, offering tailored solutions for therapy practices, including tax filings, financial planning, and budgeting.
• Despite your knowledge of HIPAA, you may only sometimes know what constitutes a violation.

TAX PREPARATIONfor Therapists

That means you no longer have to record every transaction in your general ledger by hand. In addition to your accounting records, you are going to need a system in place to keep your clinical records. Clinical records typically contain personal health information (PHI). So with this you need to be aware of being HIPAA secure and have that information protected.

How to Invest with Variable Income as a Therapist

Meticulous bookkeeping also ensures that you pay taxes based on accurate information and are always in excellent standing with the tax authorities. Many therapists have shared positive feedback regarding their experiences with QuickBooks through platforms like Heard accounting reviews. QuickBooks contributes significantly to the financial success of therapy practices by helping them track income and expenses accurately. Users often highlight the software’s efficiency in automating repetitive tasks, streamlining invoicing, and enabling accurate financial analysis.

Believe me, if you don’t stay on top of it, it can get confusing and hectic come tax time. By adopting some good accounting habits and knowledge early on will just make your private practice more successful. We have helped her put a system in place so her income and expenses are in one place. Janet uses SimplePractice for client management and now has separate books to keep track of her profit bookkeeping for therapists each month.

• It involves anticipating and addressing tax related matters in advance, rather than reacting when tax season arrives.
• Accounting for private practice therapists helps you, as a small business owner, make decisions that will benefit the financial health of your practice.
• Whether you do your books on the fly or keep excellent records all year, preparing your statements, receipts, and other paperwork can feel like an all-consuming task.
• You also need to keep business expenses separate from personal expenses.
• I wouldn’t be an affiliate for anything I didn’t absolutely love and use.

You categorize each item in your general ledger according to whether it is income or an expense, and sort it into an account. This “account” isn’t like a bank account—it’s a category used to manage transactions in your general ledger. Your full list of accounts (or categories) is called your chart of accounts. An accounting application that recording transactions comes highly recommended is Freshbooks. It is really designed for small businesses and would be a good app to start with.

Hire People to Handle Your Bookkeeping Software

If you want to avoid severe ramifications for your practice, be diligent and well-informed about your billing compliance. As a healthcare provider, you must account for more than just patient payments. You also have to deal with insurance companies and government-backed programs like Medicare and Medicaid. Falling behind in any of these areas can Bookkeeping for Chiropractors lead to stiff fines and interest penalties. Instead, utilizing careful planning will not only help your practice stay on top of obligations, but it can also help you implement money-saving tax strategies. Healthcare accountants play a crucial role in managing the financial operations of healthcare organizations such as hospitals, clinics, and medical …

Grow Your Therapy Practice with Expert Tax Advice

We can help you optimize cash flow and be your “go-to” when you have financial questions—from growth and expansion to tax planning. Taxes are a huge hurdle for many private practice therapists simply because they do not know how to prepare for them properly. Without careful planning, they may come up short when taxes are due, and they panic, which can lead to poor financial decisions. QBO also offers more advanced options in terms of how you generate cash flow statements, taking into account factors like depreciation.