Having disorganized finances is an issue that hurts a lot of therapists in private practice. If you struggle with shame around this, it might help to know you're not alone. The timing is perfect to talk about this because it’s tax time. Many of you are getting your tax information together right now. I just did mine a couple of weeks ago and sent it off to my accountant. When you’re preparing your taxes, you are reminded that it’s vital to be financially organized.

When you don’t have functional and consistent systems for handling your practice money, it’s hard to grow. Here are the minimum numbers you need systems for:

Tracking business expenses
Tracking bills to be paid
Tracking collected and uncollected fees

When you have a hole in those systems, you lose time and money. You also experience a yucky feeling of overwhelm. Disorganization leads you to spend time trying to track down the numbers for client receipts, lose money when you don’t claim all your business expenses, pay some bills late, or lose money in uncollected fees.

People often ask me if they should use particular software for managing their practice finances. The software you choose is less important than the consistent habit of using the system you have in place. If you’ve got a spreadsheet and a calendar, you can track the numbers you need. Now I’ll go over the minimum financial organization you need to have if you’re in private practice.

Tracking business expenses

Daily or weekly:

Keep a big envelope for your business receipts for each year. File your receipts in that envelope every day or every week so that you don’t lose track of them.
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 these records if you get audited.
Categorize your expenses. If you use a program to track your finances, go in and choose categories for every business expense. If you don’t do this daily or weekly, you’re likely to forget what some charges were for. Use categories that you’ll use for your schedule C at tax time. If you don’t know what they are, ask your tax professional. If you do your own taxes, look up Schedule C categories.

Monthly:

Add up all of your expenses so that you have a picture of how much you’re spending in each category and overall. If you’re using a program, you can have it generate a report. If you’re using a spreadsheet, you can still take care of this quickly.

Yearly:

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 to be paid

Always use a separate account for business expenses.
Put any bills you can online and on auto pay. Keep a list of these so that you’ll notice if any aren’t automatically paid. You don’t want to accidentally get behind on a bill because your credit card expired.
Keep all incoming paper bills in one place. Once a week pay bills, write a note of the date you paid, and then file those bills right away.

Tracking collected and uncollected fees.

Daily:

Use one system to record the sessions and fees you collect every single day. The simplest 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.
Generate any requested receipts. This system makes generating those receipts for your clients very easy.

Monthly

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

Yearly

Add up all of the months of collected fees and that is the number for Gross receipts for your Schedule C.

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

Is it time to get some help with building and managing your practice? Apply for a free consultation with me.