Most people don’t give accounting much thought when they open the doors of their private practice. When it comes up the thought is “I’ll just keep costs down and do it myself!” So they roll up their sleeves and take on the accounting and bookkeeping in their private practice.
Seems to be going well at first, but as the practice grows, I find that most private practice owners generally fall into two camps when they go the DIY route with their bookkeeping.
SCENARIO #1
You are putting in the time to handle the books, spending countless hours a week on Excel spreadsheets and do-it-yourself accounting software. It might feel like you are saving money, but there can be costly blind spots that create problems for the well meaning practice owner.
Or
SCENARIO#2
You have a jammed packed schedule on a weekly basis. You have so many tasks on your to-do list that it seems nearly impossible to get them all done. Little by little, those bookkeeping tasks are at the bottom of the to do list and gradually…they might not be getting done at all. Slowly you watch that shoe box full of receipts, invoices, bills and other documents that you keep in the back of your closet start to pile up and then avoidance and procrastination starts to kick in. It could be days, weeks, or even months before you review your books and get everything up-to-date.
Private practice owners are struggling to keep everything balanced and then holding tightly to the reins when it comes to managing their own books…even once things start to get bumpy.
Well, I’ll let you in on a little secret, although you may be saving money in the short term, those out of date, unorganized books or troublesome accounting blindspots may end up costing more money in the end.
So let’s take a look…. Are you really saving money by going the DIY route? Let’s dive into 5 Ways DIY Accounting Can Cost You More
Wasted Time and Energy
I think it’s safe to say that you didn’t start your mental health private practice to do accounting. Nor do you consider yourself a financial expert. No, right? You started your private practice because you wanted to make a difference in the lives of others. You wanted to help heal and transform people’s lives. But, the more time you spend on doing your books, the less time you get to spend on growing your business and furthering your mission of helping as many people as possible, and I’m sure you don’t want that.
Poor Business Decisions
Bookkeeping is your business’s financial roadmap. Without it, it’s nearly impossible to know where your private practice stands financially or how to navigate your way to success. By not keeping accurate books, you’re limiting your ability to see a holistic view of your business’s financial health. Can you imagine starting treatment on a client without proper diagnosis? Well, essentially that’s what you’re doing when you make major business decisions without complete, accurate, and current information. This brings me to my next point…
Expensive Errors to Fix
Not reconciling your books on a monthly basis ( I prefer weekly), creates an opportunity for things to fall through the cracks, especially accounting errors. From overstating/understating your cash flows to miscategorizing transactions (i.e. assets and expenses), even if small in nature, accounting errors can go unnoticed for a really long time.
Missed Tax Deductions
Keeping your business receipts is essential to saving money during tax season…especially now when we are working with the 2018 Tax Reform. The cloud is really awesome, but keeping physical receipts provides evidence of purchase, which is required when claiming business expenses. It also helps with keeping accurate books. Without accurate books, it will be extremely difficult for your accountant to identify and write off all the tax deductions that you are eligible for.
Lack of Financing Opportunities
Inaccurate and out-of-date books can really limit the financing opportunities available to you. When applying for a business loan, you’re typically asked for your completed and most current financial statements. Without these statements, your chances of acquiring the loan of your choice is usually slim to none. So let’s get those books in order!
Listen, as a small business owner, I totally understand the desire to want to save money wherever possible. But, honestly, bookkeeping is not one of those areas I would recommend you cut corners by going at it alone. As busy practice owners, you have more important things you could be doing with your time – doing your own books shouldn’t be one of them.
If you would like more tips on bookkeeping mistakes that mental health professionals make and how to fix them, download your free guide here!