The Therapy Business Podcast
We know how challenging growing a therapy practice can be, and don’t think it should require an accounting degree just to run your business. If you own a solo or a group practice, we’re here to help you build a business that creates more time, makes more money and serves more people.
The Therapy Business Podcast
The Secret to Simple Money Management
Establishing multiple bank accounts is essential for therapy practice owners looking to gain control of their finances and simplify cash flow management. This episode outlines crucial accounts to set up, including profit, owner's pay, taxes, and operating expenses, while also emphasizing the importance of additional accounts like payroll, emergency funds, and others to support the unique needs of therapy practices.
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King Around Here by Alex Grohl
If you just have two bank accounts in your business a checking account and a savings account you are missing out on a huge opportunity to really gain control of your finances. Now we talk all the time about having some multiple bank accounts to organize and help manage your cash flow, but today I'm going to guide you through the exact accounts that we think everybody should have, and then some extra ones that might be beneficial and help you out. My name is Craig and I'm the CEO of Desi Financial Coaching. Our goal is simple to help you run a therapy practice that is permanently profitable. If you own a solo or group practice, we're here to help you build a business that creates more time, makes more money and serves more people. This is the Therapy Business Podcast more money and serves more people. This is the Therapy Business Podcast.
Speaker 1:Hearing the word cash flow a lot of times sends practice owners running for the hills. It's kind of one of those business-y financial world terms that can feel overwhelming. Like what in the world even is cash flow? How do you manage it? And, if you're like most practice owners, it's not really anything they taught you while you were in grad school. Now we work with practice owners like you all the time on this, because we know that it can be overwhelming. And you got into your craft of helping people and now, here you are, trying to run a business, manage marketing, manage the finances all of the above and it can leave us feeling stressed out and burnt out. Manage the finances, all of the above, and it can leave us feeling stressed out and burnt out. That's why we believe in simplifying things as much as possible.
Speaker 1:I have a background in education. I used to be a fourth grade teacher about a decade ago and when I started helping people with money, that was my MO. That's what we pride ourselves in is being able to take complex ideas like managing cash flow and making it something simple, making it something that anyone could do, anyone could understand and that integrates itself into your life and into your current habits. Now, the key element to this is managing our bank accounts, having multiple bank accounts to manage our money. Why that's because, yeah, sure, you should have a bookkeeping software like QuickBooks or something similar. You should be keeping up to date on those, but that doesn't necessarily mean that's what we should be using to make day-to-day decisions in the business around our finances. I think it's completely normal.
Speaker 1:And if you don't know how to read a cash flow statement or a balance sheet or a profit and loss, that's totally fine. Or a balance sheet or a profit and loss, that's totally fine. And maybe you do know how to read them. But how often are we actually looking at them and using them to make educated decisions? The problem we run into is one they can be over our heads. We are looking at this sheet and we're going awesome.
Speaker 1:Okay, what am I supposed to do with this balance sheet? Yeah, sure, I'm getting some info off of it. I have no idea what it means. I have no idea what I should be doing with it. It's all retroactive. Even if you could decode it and put it into action in your business, it's retroactive. What I mean by that is it's almost too late. You have no pulse on it. If I wanna know what happened this month, it's probably going to be middle of next month before I can really see what happened to the numbers. That is too late to take any action. At some point. We need to have a way to look into our business today, tomorrow, in this exact moment. How am I doing financially? What should I be doing in this next week or two to move the business forward, and what can I do financially to do that?
Speaker 1:The key here, like I said, is bank accounts, so I want to walk you through some core bank accounts that we recommend Now. The first few I have talked about multiple times. We have a podcast all about transforming your practice using the Profit First system. I believe it was episode two or three. I would recommend going back and finding that and listening to it. I'm going to walk you briefly through the accounts, but this system is really really important and implementing it into your business is key. So, after you finish this episode, go back to get deeper context into some of these first five accounts that I'm going to talk about Now.
Speaker 1:The five accounts that we think everyone should start with and there's going to be more that we're going to add on to the end are these five accounts that we're going to nickname income, profit, owner's pay taxes and operating expenses. Income is an account that we're going to use to have deposits drop into. If you're using SimplePractice, stripe, paypal, whatever you're using to collect payment, it gets deposited directly into this income account and it just sits there. We don't pay bills out of this account. We don't pay our team out of this account. It is literally a holding place for income. Then on a weekly basis for me it's every Friday I log in and I move money from income to each of these other core accounts. I have an account for profit because we prioritize profit and we teach our practice owners to prioritize it. This means that we take a certain percentage of every dollar that comes in and we move it directly into that profit account. We can use this account to pay ourselves bonuses. We can use this account to pay our team members bonuses. We can use this to build up emergency savings, pay down debt. Whatever we wanna do, this account is a priority. We're gonna move a certain percentage into profit every time money comes in. Then we're gonna have an owner's pay account. That's you. You're the practice owner. We are going to prioritize you.
Speaker 1:Too often, if we just have two bank accounts where we have one business checking account where everything comes in and goes out, we're left paying ourselves scraps. We see this time and time again Business owners paying themselves scraps. They are taking home inconsistent pay. They're taking home less than they ever did when they were working for someone else and we want to resolve that. We want to fix that. The way to do that is to have a bank account purely dedicated to your paycheck. So we're going to nickname that owner's pay and we're going to put a percentage of every dollar that comes in into that account.
Speaker 1:The next one we want is for taxes. We don't want to be stressing out at the beginning of every year because we might have a big tax bill due. We want to be paying our taxes on time, consistently, whether you're running it through payroll or whether you're logging in quarterly to pay your tax estimates. We want to set aside cash in order to accomplish this. So every time money comes in, a percentage goes to taxes and then the rest goes into operating expenses. We have a percentage going into your operating expenses. Now, this is to pay your bills. This is to pay any expenses that you have subscriptions, any services, any softwares, whatever you have. Your rent to your office comes out of this operating expense account. So these are the five core accounts that we believe in that we recommend. This is all based on that book Profit First. That recommends these five accounts.
Speaker 1:Now, that said, it's kind of generalized for all industries and we are here to talk specifically into therapy practices, whether you're a mental health therapist, a physical therapist or something in that realm, your business looks a little bit different than a lot of other industries. Let's say, a marketing agency that we might work with is going to have a completely different structure. They're not going to be dealing with insurance. They're not going to be paying team members based on commission or a flat fee for each session they do. So there's a lot of nuance that comes into it that we think therapy practices should have some additional bank accounts on top of those core accounts that I just outlined.
Speaker 1:One that I think is incredibly important is a payroll account. We're going to separate out operating expenses and payroll into two separate ones. Now, I'm not talking about your payroll, so you, as the business owner, you're covered in that owner's account. We're talking about your team, your contractors or your employees, your admin team, your clinicians, your therapists, all those people, your PTs, whatever you have on your team. We are going to put their payroll into this one account.
Speaker 1:One of the biggest stresses that practice owners face is whether or not they will make payroll. They are just reaming with anxiety around this. They're looking at their bank account. They're trying to do mental gymnastics, financial gymnastics in their brain of will I be able to make payroll? This just ensures that that happens. It's prioritizing it. So every time money comes in, we want to put a percentage into that payroll account. Now, the percentage is going to vary based on a lot of factors. So if you do a commission split, so if every clinician who works for you is taking 60%, well, that doesn't necessarily mean 60% of every dollar that comes in is going in there. Maybe you're seeing patients, maybe you have other things out there, like courses.
Speaker 1:So what I would recommend is going back and looking at your profit loss statement. I know I said those are the things that we don't wanna use to dictate short-term decisions, but this is gonna help you. Big picture, look and see how much did we earn last year. How much did we spend in payroll. So let's say you earned $100,000, for simplicity's sake, and you spent 50,000 on it in payroll. Well, that means 50% of what you brought in went toward payroll and that means our payroll. Of what you brought in went toward payroll and that means our payroll account. We're going to be putting 50% of every dollar that comes in into payroll. This should work out and balance itself out, and it's something we want to keep a pulse on every quarter. So looking and saying, okay, how much was going toward payroll? Did we cover enough? Is it increasing? Is it decreasing? Do we need to adjust that percentage? Then we can make sure payroll is always covered, always taken care of, no more stressing about that.
Speaker 1:Another account that I recommend having is one we would call the vault. It can also be called your emergency fund, your savings. This is your safety net, your cash safety net, so that, if business goes down, maybe you have one of those Decembers and Januaries that is just rough. You know, you got the holidays where a lot of clients are canceling, a lot of your clinicians might be out on vacation. You're out, and then you move into January where it's flu season and suddenly you're like, okay, it's been 60 days and our client numbers have been way down, our session numbers have been way down and you're starting to stress and panic financially. Well, having a cash nest egg on hand like this is huge. Now you could allocate a percentage every month into the vault, which is perfectly fine, but you could also, like I was talking about, that profit account is, as money accumulates, into profit, at the end of the quarter you can take half of it and move it down into that vault. So every quarter you're dumping a large sum of cash into that vault to build it up. I recommend having about three to six months of your operating expenses in here, including your paycheck in that account. How much do you need to pay your team, to pay the rent, to pay your softwares and to pay you every month? And then we're going to multiply that by three to six and keep that in that savings account ready to go in case you need it.
Speaker 1:Another account that we think everyone should have is a training and coaching or training and development account. Investing in yourself is so important. It's something that successful business owners do Now, whether this is going to conferences, whether this is joining master conferences, whether this is joining masterminds, hiring coaches, whatever it is that you are investing in yourself and that you're prioritizing it. So one to 2% of every dollar that comes in, if you allocate it toward training and development, it's easier for you to make those investments when the time comes. So let's say you meet with a business coach or a profit coach, I don't know and you're talking to them and you're wanting to invest in that program. You're nervous about the finances. Having an account that is specifically for that is going to ease that tension, ease that wondering of can I afford this or not? So having some money set aside intentionally to reinvest in you as the business owner again, if you're going to be flying to conferences, something that can cover your hotel, your flight, the conference ticket, if you're wanting to join networking groups or mastermind groups or an online course, whatever it is having cash on hand is going to be huge.
Speaker 1:In order to do that, all right, the next one I'm going to recommend is if you have debt, so we would call this a debt destroyer account. This is going to help you pay down your debt faster. Now, your operating expenses will be covering any accruing debt. So if you have a credit card that you are rolling, let's just say, meaning you are charging all your subscriptions, all your bills are being charged to that card, and then you're paying it off at the end of the month, well, opex will still cover that because that's your expenses. So you're going to make sure you're at least not accruing new debt on that credit card. And then you can have a debt destroyer account where we maybe allocate a few percentage points to that and then every month, you take whatever's in that account and you throw it down to reduce that principal balance on your debt.
Speaker 1:Now there's a lot of ways to tackle debt in your business, whether it's the debt snowball, the debt avalanche, meaning looking at interest rate. Debt snowball will be smallest balance to largest balance, debt avalanche is the highest interest rate to lowest interest rate. There's a lot of things to consider, but I would say, just look at your options. We do have an episode as well on getting out of debt in your practice and a lot of those different strategies, so I'll link that in the show notes if you want to go back and check that out. All right. So, using an account to pay off debt if that is on your goal, if that's one of your goals for the year, let's do that.
Speaker 1:And then, finally, another account that I recommend is a retirement account. If you're trying to invest in retirement now as a business owner, maybe you don't have a 401k for your team, maybe you don't have a retirement plan for your team, but that doesn't mean that you can't be intentionally setting money aside to invest in that. Now I have a completely different business, which is my music business, and in that one. I have an account titled Roth IRA and every time I earn money from music, a certain amount goes into that account and then every month it gets invested into my retirement. So I'm intentionally setting that money aside. As a business owner, we see a lot of times that people leave their nine to five. Maybe it's a corporate job or wherever they are. Maybe they have a 401k plan or some kind of retirement plan and then they go into business for themselves and suddenly five, 10 plus years go by and they haven't been investing in their retirement, which is a huge opportunity missed.
Speaker 1:So we want you investing for the future, and having an account where, again, you have a few percentage points set aside can be huge. Now what I would do is I would take some of your owner's pay percentage and set that aside for for this retirement fund. So let's just say you're putting 40% into owner's pay. Maybe you put 35% into owner's pay and 5% into your retirement fund. It really comes down to figuring out your key percentages.
Speaker 1:Now, percentages can be tricky. It's really kind of a challenge to go back One. We want to go back and say what percentage have I been spending, like I said, on payroll, on operating expenses, what have I been taking home, what percentage of that compared to my revenue? But also, where should I be? What is a healthy percentage? I can look at those things, but if I'm spending 90% on operating expenses, that's not healthy. We wanna be able to get our business to a healthier place. Now on our website we do have a free quiz that's gonna at least help you pinpoint what percentages should you be doing in your business with these bank accounts. So you're welcome to take that free quiz. Just answer a few questions and it's going to send you a custom report that's going to say here's what percent should be going into profit, here's what should be going into owner's pay, et cetera. So go to our website. I'll put that in the show notes as well. Take that quiz to get some insight into that.
Speaker 1:We also have a team of coaches who. This is what we do. We know the therapy industry incredibly well. We work with a lot of practices and we help them pinpoint. Where am I today? What where? Where am I financially? What does my business look like right now, percentage wise, where should I be and how can I get there? So we give you that snapshot and we walk with you and guide you through this whole process, because what we've learned is most people wouldn't consider themselves money people. They get overwhelmed by it or they just have so many balls they're juggling right now in their business that this is something that is incredibly important but has just gotten pushed to the back burner because of all the other things that you're doing. I highly highly recommend you schedule a call with one of our coaches to get some help figuring out where your business is now and figuring out how to get to that best place you can possibly be. It is one of those working with our team. Yes, there's an investment, but it is one of those things where you get that investment back because we are saving you money by showing you exactly how to create that system. So there's always a link in our show notes to get connected with one of our coaches. I highly recommend you take advantage of that. All right, these are the accounts we should have.
Speaker 1:If you are using a bank that has free accounts, then I would say there's make, make use of it. There's really not a limit to what you can have. If there's something you're trying to do, if you're saving for a building or an employee, open an account for those things. If you have a bank that charges you for every account that you have open, I recommend considering switching to one that has free checking business accounts or checking free savings accounts for businesses. So there are a lot of credit unions out there.
Speaker 1:Relay Financial is one that we highly recommend to therapy practices. It's an online business bank. They work really well, with Profit First, so you can automate those transfers in your bank accounts. You can add bank accounts in just a couple minutes by hopping into your account and you can add, I believe, up to 20 accounts right now. So Relay is fantastic. We will drop a link in the show notes to that as well. So lots of links coming at you today Fantastic. We will drop a link in the show notes to that as well. So lots of links coming at you today. So finding a place that has free checking accounts is going to be vital in order to really hone in on managing your cash flow. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review and share it with a practice owner that you may know If your practice needs help getting organized with its finances or just growing your practice. Head to therapybusinesspodcom to learn how we can help.
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