Bookkeeping is simply a way to account for all of the money flowing in and out of your business. Many think that bookkeeping is only used when it’s time to file taxes and you need to submit your reports to the IRS. However, private practice bookkeeping can really give a clinician a deeper understanding of how their practice is doing financially so they can make better business decisions.
For example, as a clinician there may be an annual conference you want to attend. And each year the conference falls during a time when your referrals also drop. It makes sense to go to the conference for the training and education, plus it’s during a slower time in your practice.
However, the financial hit of the conference could be very stressful. If you see this trend in your referrals alongside short increases in expenses, you can plan your cash flow better. Meaning, you can set aside money each month to pay for the conference so it makes less of an impact on your monthly income.
If you use your bookkeeping reports to evaluate trends in your income, it can inform which services to market and which services to eliminate, so you focus on what is essential in your business.
We’ve heard many private practice owners share their experience of bookkeeping as simply categorizing transactions. However, private practice bookkeeping goes far and above categorizing. For most private practices you have a minimum of three steps that you must cover in your bookkeeping process—categorization, reconciliation, and reports. Some private practices will have accounts receivable and payable, but for the majority, these three will suffice, whether done by you or by a certified bookkeeper.
It’s also helpful to evaluate your current bookkeeping knowledge. By filling in any gaps, you can better design and develop your own billing process. This ebook dives into some helpful terms to know when navigating the billing and bookkeeping world.
Once you know the process, a question often remains for private practice owners. Who can do the bookkeeping? We often find there is confusion over a bookkeeper vs. an accountant.
A bookkeeper can be anyone who keeps your books up to date and accurate. They can be your accountant, a certified bookkeeper, or yourself. There are certifications for bookkeeping, such as a Quickbooks-certified bookkeeper, but this is not a requirement to operate as a bookkeeper in the US.
Your accountant is an overqualified bookkeeper. They have additional knowledge in taking those reports to come up with a plan for your tax filings. Your accountant is typically a tax strategist and the person who files your business taxes. Most businesses need both a bookkeeper and an accountant.
Once you have the person identified to go through the bookkeeping process, you then need bookkeeping software. Gone are the days of spreadsheets. Spreadsheets can’t tell you if you’re missing a transaction, they don’t sync with other apps, and they leave a lot of room for error. This ebook discusses some best bookkeeping software for private practice, and why they might work for your practice.
As a clinician, another consideration for bookkeeping in private practice is how you’re protecting client information. There’s currently no HIPAA-compliant bookkeeping software, so in order to keep your practice compliant and your client data secure, you’ll likely need a bookkeeping software and a secure practice management software.
Even if you’ve done the best bookkeeping throughout the year, preparing your statements, receipts, and other various paperwork for your accountant can take a lot of work. To make sure you’re taking advantage of all tax deductions, seek help from a tax professional. It’s also best to plan ahead. During the year, prioritize paying your quarterly taxes. Then closer to the end of the year, touch base with your accountant or tax professional.
Download this free ebook today to learn more about the basics of bookkeeping for private practice.