Simple Accounts for Complementary Practitioners
I know this is not a comfortable topic for many complementary practitioners and therapists. For many, they would rather avoid the whole area, but knowing your numbers is key to a thriving practice.
In order to provide the best service to your clients, you need to feel valued and secure in your work. Part of that comes from having enough money coming in to pay your bills and afford the things you want.
It’s important that you understand your finances, even if it’s only in the simplest terms. This way you will know what you need to earn, and from that, work out what you are going to do to achieve it.
Gowning up my Dad used to say, “a good accountant will save you far more, than they cost.” I can remember thinking when I first had to do tax returns, this was an extra expense I could well do without.
Moving on a few years and running my own businesses, a good accountant is something I can’t afford not to have. They will help you to work efficiently within the maze of financial regulations, whilst making the most from your hard-earned income.
It’s important to understand how much you need to earn each month to cover your cost of living. The reality for many practitioners is, they have other jobs to subsidise their practice while they build it. You need to know how much you need to earn, so you can ensure you have different income streams in place, if necessary.
The easiest way to do this, is to list all your monthly outgoings and make sure you include an allowance for the things you pay every six or twelve months such as car tax, or holidays. This will give you an idea of how much money you need each month, to maintain your lifestyle.
There are basic numbers that you need to track, to understand how well your business is running and what money you have available.
It’s important to know what income is coming into your business and where it is coming from in terms of your clients and services. Tracking these will allow you to identify the things that are working for you, and those that aren’t.
As well as knowing which clients are buying what, you need to know that you have actually been paid. This way you can chase any late payers, sooner rather than later.
This will allow you to see where you spend money, to provide your services and products.
Your fixed costs (or overheads) each month are those that require payment, whether you see clients, or not, e.g. professional fees, staff, equipment and insurance.
There is also the cost of sales which are those associated with seeing clients. These may include room rent, remedies and card transaction fees.
If you are a sole trader and you don’t see huge numbers of clients, it is easy to manage your accounts on a spreadsheet.
Set up a simple spreadsheet for each year, with separate pages for income, expenditure and one that gives you a summary combining your income and expenditure.
Include a column on your income sheet to note when you have been paid. This will clearly show if anyone owes you money, which you can then act on.
I use a spreadsheet for my work as a practitioner, and it works perfectly.
If you are growing and there are lots of different aspects to your business, you are best to upgrade to accounting software. There are many online options available, these will allow anyone supporting you to also access your accounts.
Before signing up to any, speak with your accountant first. They understand your accounts and could be a great source of support, especially in the early days of setting the system up.
I use Kashflow (link) for Garlen, which is a fantastic online accounting system. Kashflow was recommended by my accountant. It is designed for small businesses, and uses plain English rather than ‘accounts speak’. There has been a huge learning curve, but with patience and a few calls to my accountant, I now have a system that is future proofing my business accounts.
However you prepare your accounts, you need to make sure you keep receipts for all business expenses. If you get into this habit, you will save yourself money because nothing will be missing.
I simply have a folder in my desk drawer where I put all receipts. I sort them out and file them once I account for them.
Schedule time in your diary every month to do your accounts. It only takes a couple of hours, and it will be done and dusted!
I do this and I know exactly where I am in my business. It allows me to decide what my next steps are. The other bonus is, when it is time for my tax return, everything is ready for my accountant. Stress free!
Make good decisions
Knowing your numbers will provide you with the power to make great decisions.
You will know if you have enough money coming in. If not, whether you need to find a way of subsidising your practice with different income streams.
You will know what money you have available to invest in new equipment, or training, to allow you, and your practice to thrive.
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