Q: I got into the mental health field to help people, not to be in business. As I’ve started trying to manage the finances for my practice, I am feeling overwhelmed at how much time it is taking away from the work. Can you help me?
A: One of the reasons I started Body of Accounting was because of the importance of businesses focused on health and wellness are to my life. Without careful attention to how our minds and bodies are performing, there is no business for us to care for or dreams to work towards. Physical and mental wellness is everything.
I applaud your desire to focus on serving your clients well. However, I want to challenge your assumption that your finances are taking away from your work. As a practice owner, I would argue that it is a critical aspect of your work. You need to make sure that you are bringing in money to serve your clients, right?
For therapists and counselor with small or individual practices, the passion to help others can sometimes mean not giving the same level of attention to their roles as business owners. Let’s focus on one of the most fundamental aspects of accounting: defining your money apart from your business’ money.
Separate Yourself from Your Business
As an entrepreneur, you become one with what you do. Your passion is your work, and your work is your passion. The lines between your private and personal lives begin to blend together, which can be invigorating but can also get you into trouble. It’s essential that you not blur the lines between your personal and business expenses.
Here are some ways to avoid co-mingling of funds that are simple to manage and indispensable to the long-term growth and sustainability of your practice.
1. Create a Business Bank Account
This is the first and most important step you can take in avoiding the co-mingling of your funds. To make things easy, you can create a business account at the same institution where you have your personal account(s). But you need that separate account for your business expenses.
Get a debit card to make the process of spending towards your business as simple as possible. Use it to set up payments for recurring expenses like utility payments, professional memberships and publications. This is how you’ll pay for marketing costs and supplies for your office.
2. Track Income Versus Expenses
Having your spending all in one place has many benefits. It allows you to track in one place what you’re spending on your business and what you’re bringing in–in other words, your expenses versus your income.
Your goals is to have your income outweigh expenses, and the first step in meeting that goal is knowing where your money is going.
Another benefit of creating an account for your business is that you’re building its credit history, which is vital as you want to consider options like loans to help aid the growth of your business.
3. Set Your Payday
Running a business doesn’t mean that you no longer get a paycheck. Yes, at the very beginning of opening your practice you will have a number of expenses needed to launch, and these will likely outweigh what you bring in as you work to attract new clients. Once do have some money coming in, you can then determine the amount and frequency of payments you’d like to make from your business.
That’s right, my friend. You get to give yourself a paycheck. Who said finance can’t be fun?
To get in good habits early on, be sure to create a paper trail. That’s one of the essential aspects of good accounting for your practice–document everything. Write a check from your business to your personal account and clearly note the purpose of the funds.
Getting into good financial habits is at the heart of every business. It doesn’t have to be scary, overwhelming, or time intensive. By created clear systems and following best practices from the beginning, you can focus your talents on the critical work of serving your clients.