That’s what one of my clients said right before doing one of the hardest things a human can do—ask for help. Chasing profits is not usually in the makeup of most practitioners. So if bookkeeping is not your cup of tea, I get it. You probably didn’t go into private practice because of your love for accounting. Plus, the business side of running your practice can feel like an endless list of tasks that leave you—in the words of my client—drowning.
The good news? Your business dreams don’t have to stay dreams. Those dreams can become reality when you have a foundational understanding of your practice’s finances. The goals you set can actually be achieved—even without your fingers crossed.
Tackle Your Bookkeeping Challenges
The financial side of private practice is overwhelming for a lot of practitioners, but it’s worse to not face your money challenges head-on. With a little guidance and research, you can take control of the financial health of your business. Make sure you avoid these three common bookkeeping mistakes—paying yourself, planning for taxes, and hiring.
Pay Yourself the Right Way
Maybe you can relate to my client who was running her personal expenses through her business because she didn’t know how to pay herself. This client told my team, “I’m not even paying myself for the work I do!” and was feeling resentful towards her business. Turns out, my client wasn’t paying herself a salary, but she was paying for personal expenses through the business.
That’s called co-mingling. And the IRS doesn’t like it one bit. Keep in mind that how you pay yourself matters and the rules will vary based on your legal entity, so do your homework. When you’re setting up your practice’s finances, make sure you check any applicable laws in your state. You can always consult a bookkeeping professional if you need more guidance.
Plan Ahead for Taxes
Maybe you fall prey to another common bookkeeping pitfall—not saving for taxes because you didn’t know where to start. How much you should save can vary based on the nature and size of your practice. If your practice is fairly consistent year to year, look at past tax bills to estimate what percentage of your income you should set aside. If you don’t plan for taxes ahead of time, you may find yourself in a situation where you’ve already spent all of your profits and get stuck with a big tax bill.
In the event that you do end up with a big tax bill, you can set up payment plans with the IRS and/or your state to help get your business back on track. It might mean tightening your belt for a year or two. But as long you have a plan in place, you can get out of your debt. It’s essential to have clear financial goals to make sure you have that light at the end of the tunnel to work toward.
Taxes can be confusing enough for individuals—let alone for a business. If you insist on filing on your own, do your research first. Don’t hesitate to reach out to a tax professional if you’re feeling overwhelmed. Professionals can help you fix any errors and set you up for success in the future.
Do Your Due Diligence Before Hiring
Hiring may not be the first thing that comes to mind when it comes to bookkeeping. However, you can add revenue to your practice if you hire additional clinicians.
But first, you’ll need to plan ahead for associated expenses like payroll and extra office space—plus, all the extra time you’ll spend training, managing, and supervising your new hires. That’s time that you won’t be spent on other parts of your practice, like direct client care. Too often, private practitioners don’t plan for this aspect, and find themselves overwhelmed by a new hire, when the whole idea was to reduce your stress and workload.
Hiring can be confusing and overwhelming, but it’s absolutely worth it if your dream is to grow your practice. It’s important to lean on your community in this instance. Reach out to mentors or colleagues who have experience with hiring and ask their advice. But even before you do that, make sure you have a solid understanding of your budget, so you know exactly what it’ll mean for your business to hire another person.
The Bottom Line: Don’t Avoid Your Bookkeeping
I’ve seen firsthand how incredibly rewarding private practice can be—both professionally and financially. But my guess is that money isn’t the real reason you went into this business. It was probably the people! Because of that, you may not fully consider the financial implications of every important business decision you make right now—and that makes sense. It isn’t always your priority.
The problem is that avoiding those bookkeeping decisions can eventually get you in a sticky place. Just because you focus on the money aspect of private practice doesn’t mean you love the work or your clients any less. In reality, having the knowledge and confidence to examine your finances head-on can actually make it easier for you to focus on other things.
Even as a private practitioner, you’re still tasked with thinking and operating like an entrepreneur. It’s not just about profits. It’s about discovering how the financial aspect of your business can empower you to run a practice that’ll best serve your clients. When you achieve a holistic understanding of your business’ finances, you’ll unlock greater control and ultimately, fulfillment.
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