As a business owner, it’s important to understand the accounting essentials that will help you get a handle on your business finances. Accounting, while it may not be your favorite thing in your practice to do, provides insight into how well your business is running and helps you make informed decisions.
You have a lot on your plate balancing your clients and administrative tasks for your business, but with the right strategies in place for your essential accounting tasks, you can help ensure your business is running smoothly.
This blog post will provide an overview of accounting essentials every mental health practice owner needs to implement to be successful.
Create a Strong Budget
Creating a budget for your practice allows you to make a plan for your money. When you are proactive with your money, you can avoid overspending and help ensure you use your resources effectively.
Your budget will allow you to monitor as you go and see clearly where the variances are, which may be due to vendor increases, unexpected expenses, or simply overspending, so you can make improvements.
To create a budget, first list all expected income sources, such as payments from clients and insurance companies. Then, list all business expenses such as accounting services, rent, and office supplies. The goal is to get your budget to zero, whether that means finding ways to increase your income or reduce expenses. Or, if you have excess income, choose how you will save or maybe invest that extra for the future.
Don’t forget about the items paid annually, such as taxes, and be sure you set aside funds for unforeseen expenses.
Keep an Organized Chart of Accounts
It’s important to have a detailed accounting system that is organized and easy to understand. This includes setting up an organized chart of accounts that categorizes different types of income and expenses specific to your practice.
A chart of accounts lists all the categories of your income and expenses and can also incorporate subcategories. It allows you to organize all your transactions so you can see them in easy-to-understand financial reports, such as your balance sheet and income statement. These reports will also allow you to compare your current year’s financials to prior years and see trends.
You want to have enough accounts to clearly see everything but not too many that your accounting reports become too detailed and cluttered.
Implement Clear Goals and Objectives
It’s important to have clear goals and objectives for your business. These should not only be written down somewhere but also tracked regularly. Goals and objectives help you identify where you want your business to be and how you will get there.
To be helpful, your goals must follow the SMART guidelines – Specific, Measurable, Achievable, Relevant, and Time-bound.
For example, increasing revenue by 10% by the end of next year.
This goal:
- Is specific
- Can be measured by calculating the percentage increase
- Is attainable based on previous trends
- Is relevant to your business
- Has a deadline of the end of next year
Use a KPI Tracking Strategy
To know if you are meeting your goals, you need to be able to measure your goals. Key Performance Indicators (KPIs) are a great way to do this.
KPIs allow you to:
- Track progress
- Identify areas for improvement
- Make adjustments as necessary
By tracking key accounting metrics such as cash flow, profitability, and debt levels, you can ensure that you are on your way to meeting your goals. And if you’re not, you can adjust as needed.
The right KPIs for your business will give you the information you need to make good decisions because you can compare your current numbers to your prior year’s numbers or maybe other practices in your industry to give them context.
Implement a Tax Strategy
Having a tax strategy can make a huge difference in your practice.
It can help you become aware of the tax breaks available to you, such as deductions and credits. Knowing which expenses are deductible will help you save money in the long run.
Additionally, accounting for taxes early in the year can allow you to plan and set aside funds for when it’s time to make a payment. This way, you won’t be surprised when it comes time to pay your taxes, and you have enough funds saved.
A good tax strategy should be established to help minimize your tax liability and give you direction throughout the year. It allows you to proactively improve your tax situation before the year ends.
Work With a Trusted Accounting Partner
Finding the right accounting partner is essential for running a successful mental health practice.
A trusted accounting partner, such as Leichter Accounting Services, brings value to your practice beyond crunching numbers. We specialize in bookkeeping, accounting, and tax service for small businesses with friendly, professional support, as well as providing financial direction to our clients.
Contact Leichter Accounting Services today to learn more about how we can help your mental health practice.