The Complete Chart of Accounts for Therapists

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The team at Heard clearly cared about helping therapists understand what a financially healthy business looks like and empowering them to reach those goals. We specialize in a wide range of accounting services for private practices of all shapes and sizes. We’ll set up benefits, deductions, and any special circumstances. This helps us understand your employee reimbursements, benefits, time off, and all the other details.

As a small business if you are making under 6 figures and have everything organized- it shouldn’t cost more than $70 a month for someone to do your bookkeeping. They can provide you with all of your reports for tax time or to take to your appointment with the CPA during tax time. We’ll verify https://www.bookstime.com/articles/bookkeeping-for-massage-therapists that your books are a 1-to-1 mirror of the transactions as listed by your bank. Heard is the financial back-office for therapists in private practice. Once you join Heard and connect your bank accounts, you’ll be prompted to schedule your onboarding meeting with a specialist from our team.

An  example chart of accounts for your therapy practice

QBO is a cloud-based solution, so all of your bookkeeping is stored online, and accessible anywhere. This has increasingly become the standard for accounting software in general—it’s also the way Xero and Wave operate. If you already have a firm foundation in bookkeeping, and you can set aside a few hours a week to learn how the software works, QBO may be a good choice for your therapy practice. The Simple Start or Essentials packages should cover the needs of most therapists. In comparison, when you hire a bookkeeper, they make entries into your general ledger for you, and keep your books up to date.

• The tip here is that you will need have a separate accounting and bookkeeping system that does not contain PHI.
• As a clinic owner, the finances piece of the puzzle can be so overwhelming.
• This is another reason why you will need to use a separate accounting system for your tracking your business income and expenses.
• Explore the financial aspects and tax implications of PFML in detail.
• Each person should consult their attorney, business advisor, or tax advisor with respect to matters referenced in this post and podcast.
• Otherwise, it’s mainly debts—whether student loans, or any loans you may have taken out in order to get your practice off the ground—that will appear here.

If you work as an independent contractor—for instance, leading group sessions at a recovery home—you may want to break this out into a separate category, like Contract Income. But as it turns out, a quick Google search tells me that if I don’t replace a broken spark plug, eventually my engine could stop running. Discover the tax consequences of taking Paid Family and Medical Leave (PFML) in our comprehensive guide.

What Our Clients Are Saying…

Early is $11 per month, and allows you to send 20 invoices and enter 5 bills each month. Essentials is $50 per month, includes more features, and allows access for 3 users. Whether it occurs once a month or once a year, you need to categorize each and every expense, so it can be accurately entered in your general ledger.

The biggest mistake therapists make is picking a process that is stressful or that they avoid. We keep track of your daily income & expenses in a cutting edge software tool to ensure your business is right where it should be. Your chart of accounts lists all of the accounts you use to label entries in your general ledger.

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Because I appreciate their service so much, I’m an affiliate for them. I wouldn’t be an affiliate for anything I didn’t absolutely love and use. If you are looking for tax and bookkeeping help, I strongly recommend at least booking a consultation call with them. Make sure you have a place and method of tracking what money is coming in and what money is going out in your business (aka income and expenses). “Reconciling” is matching transactions on your bank statement and should be done at least monthly as a way to stay on top of your bookkeeping.

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. Every therapist who joins Heard is supported by a team of accountants, CPAs, payroll specialists, and bookkeepers who specialize in therapy practices. Be careful though not to go overboard with taking deductions. If you were ever audited, you need to be able to justify how it is a business expense.

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The benefits of working with an accouuntant who specializes in private practice means you’re not paying for a learning curve. We know what to look out for and how to steer you in a more profitable direction from the get go. Every time your therapy practice earns revenue, it’s entered in the general ledger. Every time it spends money, it’s entered in the general ledger. By using the accounts listed in your chart of accounts to categorize these transactions, you can track how your practice earns and spends money.

• This “account” isn’t like a bank account—it’s a category used to manage transactions in your general ledger.
• Since your chart of accounts is static, you can create as many copies of it as you like.
• We’ll make sure you are compliant while paying the least amount legally possible.
• In any business, it is important to have partners that you trust.
• As you grow, you will probably want to invest in a practice management system that has some accounting capabilities.
• Heard is built specifically with therapists in mind and offers personalized bookkeeping and tax services (with real humans!).

A “reasonable salary” is something you need to consider when you file paperwork to become an S-Corp. A clinician might want to “upgrade” from being an LLC or PLLC when their business grows to a point where they can benefit financially. A “reasonable salary” is state-specific and dependent on a person’s profession.

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When a business is an S-Corp, they pay themselves a “reasonable salary” (taxed money) and can take owner distributions from their business that are not taxed. Becoming an S-Corp requires some paperwork but may be worth it depending on your business’ earnings. The category “equity” includes money you’ve invested or re-invested in your business. Your therapy practice’s chart of accounts lists all the different ways your business earns and spends money, and tells you how to categorize each transaction. That’s why I recommend Heard Bookkeeping and Tax service platform. Heard is built specifically with therapists in mind and offers personalized bookkeeping and tax services (with real humans!).

It is really designed for small businesses and would be a good app to start with. It not only tracks your income and expenses, but allows you to print invoices and send bills. 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. My business grew to the point where I could no longer manage my bookkeeping.

When you earn profits, any cash you don’t take as an owner’s draw or salary becomes Retained Earnings. These funds are earmarked for business use only, in order to pay business expenses or save for the future. As part of regular bookkeeping, you (or your bookkeeper or accountant) draw on information in your general ledger to generate balance sheets and profit and loss (P&L) statements for your business. Each financial statement looks at different types of accounts to get the information it needs. You can check out my article on tax write-offs in private practice if you’d like to learn more about the land of tax deductions.