Therapists are often private practice owners and, just like any other private professional, they need to file their taxes autonomously. This is probably the most stressful aspect of being an independent professional but this is just the tip of the iceberg: beneath the surface, there is a full year of recording any expenses, tracking any payments, keeping any invoices, and so on…
Therapists are professionals who always come from a background of years and years of studies in their field, and they often have no education in bookkeeping or accounting. Many of them have no intention of throwing themselves into learning another competence that they have zero interest in. For many of them, this often means that they end up hiring someone, but is this actually solving all your problems?
Even if you hire a professional accountant you are – just the same – responsible for keeping track of income and expenses, filling in invoices properly, retaining them in the tidiest way so that you are always aware of where every document is, and so on…
The best practice is to learn what you need to know about price practice finance and find the best tools that can help simplify the process. This is exactly what we’re about to discuss in this article.
In this section, we will be exploring the best practices when it comes to bookkeeping for therapists.
The first thing you need to learn when it comes to bookkeeping for therapists is that you should keep your business and personal finances separate.
Sometimes, your fiscal arrangement demands that there is a bank account dedicated to your business. In this case, there is a bank account registered with the name of your company.
In other cases, and this happens especially if you are working on your own and not in a studio of associates, you are not required to have a business bank account. In this case, for example, your clients’ payments can end up directly in your personal account, and if you need to purchase supplies, you can pay for them with your personal credit card. We are recommending; however, that you keep your business’s finances separate from your personal ones just the same. Create a second bank account with which you can handle your business’s income and expenses and move the money periodically from your business account to your personal one, making sure that you leave enough money in your business account to pay your taxes, debts, and expenses.
If you are a therapist working privately, you want to make sure that you find a way of keeping track of money, all the money that goes in and out of your business account.
This can be done manually, with Excel Sheets, even though this isn’t the most recommended method.
What is the most recommended way of keeping track of transactions, then? It’s using software. The best way of showing the efficiency of software is with an example.
Any time you receive a payment for your service, you’ll have to fill in an invoice and deliver the invoice to your client, and then you’ll have money incoming in your business’s bank account. Once you’ve done all this, your bookkeeping job is far from over: you still need to store a copy of that invoice in a system that you’ve created (because you need to be able to find it if anyone asks) and add that income to your Excel Sheets, or bookkeeping paper sheet.
If you are using software, like Less Account’s, this entire process will instead be like this: you use the software to fill in and send the invoice to your client. Then, it all happens automatically: the income is registered, and the invoice is stored with all its details. Your job is done.
Once a year or maybe more, you’ll need to file your taxes. Many private therapists hire a professional just for this task. The complexity of this stage depends on how good and precise your bookkeeping is: whether it is you or a professional accountant that is filing your taxes, if you’ve cared for your bookkeeping carefully during the year, everything will be easier.
Those who use software have advantages in this phase, because of two main reasons:
If your business and personal accounts aren’t separated, having a clear idea about the taxes you’ll need to pay is highly important during the year. If you don’t have this data, you can risk spending more than what you can: the day you’ll need to pay taxes, you can have a bad surprise and find yourself unable to pay them. This can happen even if you have the two accounts separated, but the risk is higher if there is only one bank account.
Another bookkeeping tip is to categorize your expenses, so that you know – for example – how much you’ve spent on supplies, travel, education… Again, if you use bookkeeping software everything becomes easier because it all becomes automated and the software will categorize expenses without you even realizing it.
The four points we’ve discussed in this article are the basic knowledge you need to take care of your bookkeeping as a private therapist. If you keep in mind these four tips, you won’t need to hire a professional (and you can save some money) and bookkeeping won’t become overwhelming.
In the course of the article, we also mentioned more than once that bookkeeping software can be the key to precise and reliable bookkeeping. Not to mention that, with software like Less Accounting’s, bookkeeping becomes a side activity and you can focus on the work you are paid for!