Expert Financial Management Guide for Therapists, Counselors, and Private Practices

Your bookkeeping team categorizes and reconciles your books for you every month so you don’t have to. Determine how much to pay yourself and set aside for taxes each month. Because of this, this option is likely a great fit for many therapists in private practice. The big win of this option is you get to have the pros of both the affordability of automated software and the professional Accounting for Churches work of an accountant directly consulting with you for your financial needs. I’ve crossed my fingers and toes for you that you don’t ever get audited by the IRS.

Regularly Run Reports

This has increasingly become the standard for accounting software in general—it’s also the way Xero and Wave operate. Certainly this is not all of the information you will need to run your private practice from the accounting side of things. And as has already been mentioned DO SEEK THE ADVICE OF A PROFESSIONAL AS YOU SET THINGS UP. Once you set things up, it becomes easy to manage and understand. A tax accountant can help with anything related to quarterly estimates, annual tax filings, and helping out with setting up an LLC/PLLC or filing paperwork to become a different business entity. A tax lawyer can help with the paperwork and legalities of setting up a partnership, say moving from an individual practitioner to a group practice.

Label and describe every item on your chart of accounts

If you were ever audited, you need to be able to justify how it is a business expense. (No you cannot just go to dinner with your spouse and write it off as a business expense!)  Again, check with an accountant on this. Make sure you have a place and method of tracking what money is coming in and what money is going out in your business (aka income and expenses). “Reconciling” is matching transactions on your bank statement and should be done at least monthly as a way to stay on top of your bookkeeping. Your therapy practice’s chart of accounts lists all the different ways your business earns and spends money, and tells you how to categorize each transaction. One solution is to categorize your business transactions at the end of each month or quarter.

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• Heard has really helped reduce my stress around accounting and taxes.
• Real estate accounting combines elements of both financial and managerial accounting to address the specific needs of real estate transactions …
• Private practice therapists face specific financial challenges and opportunities that are different from other small businesses.
• As a therapist, you’re likely a member of professional organizations like the American Counseling Association.

Some basic accounting practices and knowledge was something I had to learn. They know how to maximize tax benefits and minimize expenses, as well as how to make your business more financially streamlined and efficient. They will be able to not just at tax time, but throughout the year as your finances require attention. How much you’re expecting to make before expenses over the next 12 months from private practice and/or as a 1099 contractor.

Notable features

Custom solutions can be created for each therapist or practice with a focus on what matters most to them. If you have to do this, create separate accounts for the business, at the very least. Even if they are standard accounts for now, or a personal credit card you earmark for your therapy business, at least you have the separation of the expenses and bills. Especially in small businesses, it’s often easy to accidentally mingle personal and business money. Being a sole proprietor or having a small LLC means you have fewer options for business financing and spending, so you might feel stuck using your personal bank or credit cards.

Income can also come from bookkeeping for therapists any products you might sell, like books or other materials in your business (also known as “gross income”). It will be even more valuable if you can find a private practice focused bookkeeping service that speaks your industry’s language and knows the legal and tax nuances applicable to your industry. They take the pressure off of bookkeeping and provide quarterly tax estimates.

Home Office Simplified Method‍

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Whether it occurs once a month or once a year, you need to categorize each and every expense, so it can be accurately entered in your general ledger.

It also has the ability to produce reports and give you financial analyses. So here are some basic tips and things to know when it comes to accounting, taxes and bookkeeping when you are in private practice as a counselor or therapist. Unless you had some coursework as an undergraduate in accounting or bookkeeping, most of us in the mental health fields have had little to no education or training on those subjects. I know that was true for me.  I do well just to keep my checkbook balanced!

• Therapists rarely have extensive financial or business training.
• The benefits of working with an accouuntant who specializes in private practice means you’re not paying for a learning curve.
• You became a therapist to help people, and managing your finances effectively is just another way of ensuring you can keep doing that for years to come.
• Sorenson & Company, CPA, would like to create a relationship with you and your practice.
• These statements offer insights into your practice’s financial performance and help identify areas that may need attention.

Bookkeeping is the foundation of a healthy business

But if you ever do, you’ll want to feel rest assured that all your reporting is correct and that they won’t find anything fishy going on with your accounting. The problem with DIYing your accounting is you might not even realize that you’re reporting something incorrectly or missing something contribution margin important on your taxes. In 2020, the federal government estimated that Medicare improper payments against healthcare providers came to $43 billion.