You don’t go into private practice because you’re excited about doing your own accounting.
In fact, most mental health professionals have little to no education in finance. You’ve learned the rules about staying HIPAA compliant in billing, but no one ever trained you on keeping your books.
Here are five bookkeeping best practices that will simplify and de-stress bookkeeping:
Separate business and personal
As mental health professional, you understand the importance of keeping your business and personal life separate. However, this principle doesn’t just apply to your work with clients—it’s true for your spending as well.
When you open the doors to your private practice, you should also open a separate account for your business expenses. While this may seem like an unimportant step in your business growth, intermingling spending habits will create messy books and be a nightmare come tax time.
Separating spending could be as simple as opening a free checking account with your personal bank. It’s a good idea to find an institution that will sync with your accounting software (most will), but you don’t have to use a commercial bank right away.
Keeping your accounts separate will guarantee the happiness of your accountant and the IRS come tax time.
Track everything
If you want to guarantee that you’ll get as many write-offs as possible when the taxman comes, you’ll need to keep track of everything.
Popular deductions like mileage and home office expenses ought to be recorded right away. As a small business owner, you are entitled to tax write-offs, but you do need to have proof. Save receipts, use apps to track mileage and carefully categorize transactions soon after payment (so you accurately remember them).
Once the tax year closes, you can’t go back in time. Procrastinating will only cause you to miss out on awesome savings.
And of course, don’t go overboard on taking deductions—a dinner with your boyfriend is still not a business expense. However, if you keep timely and accurate records year round, there’s no reason to feel nervous about claiming real deductions.
Set a schedule and stick to it
Not only do you need to record expenses right away, you need to take the time to reconcile your business books. Getting behind on bookkeeping will only add to your stress—plus, it’ll make it more likely that you’ll miscategorize or forget what a transaction was for.
Instead, set a schedule that works for you and stick to it. I recommend taking the time to reconcile once a week (or once a month at the very least). Set an alarm on your phone or put a reminder in your calendar and when it goes off, grit your teeth and get through your books.
Bookkeeping regularly will save you time and stress in the long run. If you put off your accounting until April, it could take you days or even weeks to straighten things out. A few minutes a week is more than worth it.
Use the tools available
If you’re not an expert accountant, that’s okay! In fact, there are lots of affordable and powerful tools available to small business owners who didn’t get a Masters in accounting.
Find an accounting solution that fits your needs—if you’re just starting out, don’t feel pressured to purchase the most expensive package. You can find free solutions that pack the same punch. Use this technology to automate reconciliation and categorization as much as possible—so you can spend your time doing what you’re good at.
The bookkeeping software you use should also integrate directly with invoicing solutions, payment processors and other tools; most cloud accounting providers offer these integrations. Sending bills and accepting payment digitally gives your private practice a standard of professionalism—plus, it means you’ll probably get paid faster.
As you grow, you may find that you have the budget to hire a bookkeeper or CPA. There’s no shame in this. Take advantage of the tools and resources available to you whenever you can.
Consider having your billing and payments connected directly to your EMR to make your practice more efficient, saving you time from the tasks of bookkeeping separately. For example, Luminello allows you to bill directly from your note for each appointment, bill insurance, and allow patients to log into the portal and pay via credit card anytime. Big time savers!
Run a business not just a practice
As a business owner, things don’t get less busy. While you’re tending to clients and growing your practice, business finances will increase too. If you can invest the time to manage and utilize your books, you won’t only be advantaged come tax time—you’ll also be better able to run your business.
When books are up-to-date, your accounting program can produce powerful financial reports for you (no math required). These reports reflect the health of your business; and when done right, they also highlight areas of potential or needed improvement. Use these reports to make strategic, data-driven decisions.
And don’t stop there! Even if you don’t have a finance background, learn as you go. Adopt good bookkeeping habits and stay updated with tax law. Talk to a CPA about your local and state requirements (a lot of accountants will even offer a free initial consultation).
Accounting isn’t as complex as you fear—with some basic math skills and regular attention to your business, you’ll be a bookkeeping guru in no time.
Author
Jaren Nichols
Author profile
Jaren Nichols is Chief Operating Officer at ZipBooks. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.