Are your finances disorganized?

Maybe you’re struggling with tracking down all the numbers you need to get your taxes ready, and you’re feeling frustrated, anxious or even ashamed. You’re not alone. Lots of therapists in private practice lack a clear set of financial systems.

When you're preparing your taxes, you're reminded of every way that your financial systems are failing you.

It’s a good time to consider making your systems better. Maybe you’re considering investing in a bookkeeping application to help you with your finances. It may be a great idea, but before you do, get clear on the systems you need.

The tool you choose is less important than the consistent habit of using whatever system you have. Even if you only have a spreadsheet and a calendar, you can track the numbers you need. I use quicken for personal and business finances, but there’s no one system that’s perfect. Just a few others to check out are FreshBooks, Quickbooks, Xero, and YNAB. As you read this, think about how you’ll create a system that suits you and your business.

There are a minimum of 3 things that you need tracking systems for in order to make your taxes easier next year.

expenses paid
bills yet to be paid
collected and uncollected fees

When you have a hole in those tracking systems, you lose time and money. You also experience a feeling of overwhelm every time you need a information and you can’t find it. Disorganization leads you to spend time trying to track down information for client receipts, lose money when you don’t claim all your business expenses, pay late fees, or lose money in uncollected fees.

Now I'll go over the bare minimum you need to do in order to track those 3 things.

Expenses Paid

Daily or weekly:

Keep a big envelope or file for your business receipts for each year. File ALL of your business receipts in that envelope. Sure, you can file your receipts in several different categorized files. If you’re in business by yourself, one file is probably going to be easier and less time consuming.
When you receive receipts online, label them or put them in a special email folder so you can find them easily. You’ll need all of those receipts if you get audited.
Categorize your expenses. If you use a program to track your finances, go in and choose or create a category for every business expense. If you’re using a spreadsheet, create categories that you can use each month. If you don’t do this daily or weekly, you’re likely to forget what some expenses were. Use categories that you’ll use for your schedule C at tax time. If you don’t know what they are, look up Schedule C categories. Go ahead. It’s easy to google.

Monthly:

Add up all of your business expenses so that you have a picture of how much you’re spending in each category and how much you’re spending overall. If you’re using a bookkeeping application, you can have it generate this report. Easy peasy.

Annually:

File the past year's big envelope. Start a new big envelope.
Add up all of those monthly numbers for each category to create your schedule C.

Bills yet to be paid

Use a separate bank account for business expenses.
Put any bills you can on autopay. Keep a list of these so that you’ll notice if any aren’t automatically paid due to a glitch in the system or an expired credit card. Losing your URL due to a late payment would be a real bummer.
Keep all incoming paper bills in one place. Once a week pay those bills, write a note on each bill of the date you paid, and then file them right away (with your other expenses paid).

Collected and Uncollected Fees

Daily:

Use one system to record the sessions and fees you collect every single day. The low tech system is to use your calendar and make a note right there of what your client paid and whether there is any fee to be collected. Be consistent with your record keeping so that no uncollected fees fall between the cracks. Online scheduling systems like simple practice and cliniko can hold your scheduling and fee information in one place.
Generate any requested receipts.

Monthly

Add up all collected fees (be sure not to include any sessions for which fees weren’t collected). Record this monthly number.

Annually

Add up all of the months of collected fees. That’s your number for Gross receipts for your Schedule C.

Of course there's much more you can track, and over time you may choose to use a more sophisticated set of systems. First get really consistent with the basics, and notice the peace of mind it brings you to be more organized.

Is it time to get some help with building the business only you can create? Apply for a free consultation with me.