As the end of the year approaches, it’s only natural for practice owners to start thinking about how they handle their accounting. After all, if you didn’t have it, you couldn’t support your practice.
One thing that I’ve noticed while talking to therapists is that they are often apprehensive about getting started – maybe they’re afraid of or intimidated by the complicated task of getting finances in order. A lot of practice owners simply toss their practice information into the hands of their accountant, hoping it will work itself out. At Owl, the best practice management we see leverages a strong, interactive relationship with an accountant as they build their success.
So how do you take the apprehension out of accounting,
and work effectively with an accountant for your practice?
Here are three key steps to get accounting working for you and your practice:
- Choosing the right accountant
- Getting your practice organized for accounting
- Managing your accounting investment
Let’s look at each of these in turn.
1. Choosing your accountant or bookkeeper
The right bookkeeper or accountant can be vital to the success of your practice, and maintaining that partnership can help you manage month- and year-end processes effectively. That ultimately saves you money and lets you focus on long-term planning to grow your business. As with any investment, someone who knows effective financing can more than pay for themselves. One thing to look out for when looking for a qualified accountant is the CPA designation. The CPA (Chartered Professional Accountants) is Canada’s regulatory body for accounting professionals. Knowing that your finances are in the hands of a CPA-accredited accountant ensures you that you’re dealing with someone who is qualified to help you.
It’s also important to know what your accountant brings to the table, in the same way that you want to hire the best receptionist or use the best practice management solution (like Owl Practice!). When making that decision, be sure to ask them questions like:
- Have you worked with clients in private practice before (therapists, optometrists, veterinarians, medical doctors)?
- What accounting services do you typically recommend for a business like mine?
- Who will be performing these services (the accountant or people, including bookkeepers, on their team)?
- How do you charge for your services (hourly rate vs. fixed price)?
- How much money should I budget for accounting services each year?
- Do you have references I could check?
It’s also worth mentioning that many accounting tasks for private practices can be done by less expensive bookkeepers. Bookkeepers often work in conjunction with accountants to manage the routine aspects of accounting. For example, bookkeepers often manage monthly cash reconciliations, tracking your receipts, payments, and money that ends up in your bank or merchant account. If doing this work isn’t your forte (or, more likely, you don’t have the time), you could think about hiring a bookkeeper to help with these regular weekly and monthly tasks to keep things organized.
What you’re really looking for is a business partner who cares about helping you grow your practice. Make sure there’s a personal fit too when making this choice. You’ll have to work with this person for years, so you might as well enjoy the working relationship and invest in someone in whom you can build trust.
2. Getting your practice organized for accounting
Most accounting for private practice is quite straight forward. It involves summarizing transactional information for your practice on a regular basis, and summarizing these details for specific purposes like monthly reconciliations or tax preparation. While this adding and subtracting is easy on the surface, there is also a lot of specific knowledge required to understand how to conform to accepted accounting principles and CRA requirements.
On the revenue side, it’s important that you’re tracking all your billable client services in some highly organized system that works for your day-to-day practice life. Most practice owners find a calendar connected to a robust and comprehensive billing engine, works best for capturing and storing all these details. A solution like Owl Practice is specifically designed to track all these revenue-generating events for you, in an easy-to-use system that integrates seamlessly with practice life. And at year-end, all this revenue data can be exported easily so your accountant can quickly summarize your earnings and receivables.
On the expense side, make sure you’re keeping receipts for everything, and your accountant can advise on which expenses are eligible as write-offs in the course of operating your business. Make sure to know what documentation is required (i.e. original receipts), and it’s good to at least have a simple organization scheme to keep things in order during the year (e.g. recurring expenses, out-of-pocket expenses). You may also want to set up a company Visa card, on which all your business expenses can be recorded easily and comprehensively. This will make tracking what you’ve spent, and tax preparation, easier for your accountant as well.
3. Managing your accounting investment
As with any services you pay for in your practice, it is important that you understand not only who is working for you, what they’ll be able to do, but also how much it will cost. Just as your clients need to understand the course and costs of treatment with you, you should expect the same from your accountant.
Prices for year-end accounting can range from a few hundred dollars to several thousand dollars. The cost varies depending on the type of practice you’re running (group practices typically are more complicated and have higher accounting costs), and the amount of organization and preparation you can bring to the table. Don’t be afraid to negotiate your price. Whether for end-of-month reconciliations or year-end tax preparation, you accountant should give you a quote estimate up-front, and let you know of any overages before they happen. You can also ask if there’s anything you can do by way of preparation to minimize cost of accounting for your business.
Finally, a good accountant should be able to suggest several ways to help you save money in your practice. Good accountants are savvy business advisors who understand your business and help you make effective decisions to maximize your profitability. Whether that’s tax strategies, decisions on buying vs. renting office space, or planning for retirement, an accountant can lend a hand beyond your year-end tax preparation. So, in addition to managing the cost for the accounting service itself, you should expect and understand the ways a good accountant can save your practice money, and reduce your taxes so you can operate as profitably as possible.
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Accounting is a required part of practice life. Being a savvy practice owner means making sure you’re choosing the right partner, getting organized to make accounting easier for yourself, and working with your accountant to maximize your practice’s bottom line.
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Practice Wisely!
