how to do bookkeeping for therapists

By the end of this post, you’ll have a sense of what route fits you best for your private practice accounting needs, as well as how you can prepare for tax season. Once all your business transactions are recorded, it’s time to go through them and reconcile your books with your bank accounts. Proper records management and storage is an essential part of any bookkeeping plan. Make sure https://www.bookstime.com/ you’ve got all your receipts ready when tax season comes—both so you can double check you aren’t missing any deductions, and so you can add them to your files. This template is primarily meant for people looking for a bookkeeping template to manage their business finances being a therapist in an easy and intuitive way. Bank reconciliation is key to any effective bookkeeping system.

How you use fund accounting

If you use accounting software, it’s likely most of your expenses are automatically imported from your bank account. But, in some cases—for instance, if you pay for an expense bookkeeping for therapists with cash—they won’t be. Plus, they specifically work with private practice owners because they believe in the importance of mental health clinicians having sound businesses.

What is your current bookkeeping process?

how to do bookkeeping for therapists

But if you break it down into simpler terms it a little easier to understand. As a small business owner, most of your business-related expenses are tax-deductible. Which means, rather than pay taxes on your private practice revenue, you first subtract a majority of your expenses and pay your taxes from that amount of money instead. With your general ledger up to date and your bank accounts reconciled, you’re ready to generate financial reports. Navigating bookkeeping for your private practice requires knowledge, attention to detail, and the right tools.

how to do bookkeeping for therapists

how to make sure your practice is ready for tax season

A better idea though is to invest in some sort of accounting or bookkeeping application/software. That way you can track your income and expenses for both business and tax purposes. They give you the tools you need to track both the income and expense side of things along with producing the reports you need to get a snapshot of your finances and growth. As a private practice therapist, at minimum, make sure you’re setting aside money for federal and state taxes, retirement, business expenses, and your salary. I’m a fan of paying yourself 1-2x a month every month, rather than taking money from your business here-and-there when you feel like it.

How to add a Transaction to the Therapists Bookkeeping template

In the previous blog post I did, I talked about the importance of knowing how to make the transition from being employed to being self-employed. We talked about some of the different ways to structure the business in terms of it being a sole proprietorship vs. a LLC or other business entity. This is an important concept when it comes to the financial side of private practice. Regardless of which structure you use, you should treat the practice as something separate from yourself. If you’re using QuickBooks Online Self-Employed (QBO SE), it may be worth upgrading to a more advanced version of QuickBooks Online once you’re committed to your business. This is because QBO SE lacks some essential features that growing businesses may need, such as the ability to track equity and accounts payable.

Monitors Your Practice’s Financial Health

how to do bookkeeping for therapists

Afterward, contact your bank to open your practice’s business checking account and apply for a business credit card. A separate bank account and credit card will simplify your bookkeeping and prevent unnecessary errors. By doing so, you’ll be able to transfer income data to your accounting program to keep your books current. If invoices aren’t paid on time, running your business can become difficult, if not impossible. Your cash flow and having the necessary funds to pay your expenses is directly affected by patient payments, so having an organized bookkeeping system can streamline this process.

Therapists seeking to effectively manage finances and expand their practice can receive invaluable guidance from a small business CFO or coach. They offer professional advice, support, and even mentorship in navigating the complexities of business and financial management. Maybe you can keep the books for your practice, but you just don’t want to.

As your own boss and business owner, you actually get to decide what your ideal looks like. As long as you follow the IRS guidelines and stay compliant, you have room to make this process fit your style and preferences, and make adjustments along the way. If you don’t have a process in place right now, or you’re feeling overwhelmed by your current process, then it may be time to outsource.

Separate personal and business finances

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