Bank Accounts Your Practice Needs

We break down a simple bank account system that keeps therapy practice cash flow clear and helps us stop overspending when everything sits in one checking account. We walk through the core accounts every practice needs, then share optional accounts that solve real problems like prepaid packages, debt, and hiring risk.

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Transcript

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Today I'm breaking down the bank accounts that I think every therapy practice or physical therapy practice needs. My name is Craig, and I'm the owner of Daisy Financial Coaching. Our team is on a mission to make your therapy practice 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. If you've been listening to this show uh for any kind of period of time, you know that I'm a big believer in having more than one bank account. For those of you who are new, what I've found is with our clients and with business owners and myself included, is when all of our money is lumped into just one checking account, it is easy for us

Why Bank Accounts Shape Spending

SPEAKER_00 0:49

to overspend. It's easy for us to think that we have more money than what we actually do. Uh it all boils down to this idea of Parkinson's law that when we have more of a resource, we tend to consume more. So if we have more income, we tend to spend more money. So that's where these multiple bank accounts come from. Now, I want to break down some of the ones that I really think that every practice needs. Uh, so the first thing I'm gonna do is break down the core accounts that I've talked about many times before. I'm gonna lump them kind of into one category, but then I'm gonna go into some what I would call some advanced accounts, some different ways that you can utilize the multiple bank accounts to help you stay organized, to help you keep the finances clear cut, and just help you stay ahead of everything. So I'm gonna start with just the core accounts that everybody needs, no matter what, if you're a therapy practice or a PT, and that is you need an income account. So that is where all of your deposits go, whether it's from insurance, whether it's from an online payment portal, whether it's cash that gets deposited or checks that get deposited. This income account is solely there to collect cash. It's it's the serving trace. So money goes in there and it sits. And then you take money from there and you divide it into these other accounts. One of them is going to be profit. So instead of profit just being an afterthought, we're gonna actually put cash into an account named profit. This account at the end of the quarter will pay you bonuses. You can use it to pay down debt, you can use it to build your savings. But the idea is that we are no longer just waiting and hoping that we're profitable. We now are actually profitable

The Six Core Practice Accounts

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with dollars in the bank. You'll have an account for owner's pay. That's you, making sure that you are paid uh what you deserve, that you're paid regularly. And the way to do that is to have its own bank account where you're earmarking cash specifically for that. Taxes, this account is designed to cover your taxes as the business owner. So you can use it to cover your payroll taxes if you run it for your paycheck, not for your employees, but to cover your own payroll taxes. You can reimburse yourself for any taxes paid. You can use it to pay your quarterly estimates, so it's there to pay the taxes on yours and the business's behalf. Next is gonna be operating expenses. This is your overhead expenses, you know, your rent, your softwares, your uh anything and everything that is doesn't have a pulse is gonna be operating expenses. And that's because payroll is the last account I recommend, and that's your people. That's everyone who you are employing. So I don't include you in that, you're an owner's pay, but everyone else. So your admin team, your therapists, your PTs, your PTAs, everybody that is working for you is going to be in this payroll account. So from the income account, we divide everything out by percentages. So you come up with a percentage of I'm gonna put this much into payroll, this much into operating expenses every week, and that's gonna help you stay in control, have your money organized and put into these little buckets. Now, some of you are hearing me say, here are six bank accounts that you should have, and you're already feeling overwhelmed by just having a bunch of bank accounts, right? So what I've found is it makes things so much simpler. And so if you're hearing this and you're thinking, good night, that sounds complicated. It really is not. Now, maybe setting it up takes takes some work, but once you have it set up, just imagine opening your phone and logging into your banking app and knowing exactly where you stand financially in all those categories. You'll know exactly will I have enough to pay myself the paycheck I need? Will I have enough for the quarterly tax estimate? Do I have enough to make payroll? All of those questions are answered in an instant. And if they're not, if you don't have enough, then you are in a place to solve that

The One Account To Start Today

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problem before it happens. Because what happened in the past, if you didn't have enough to run payroll, if it was all in one checking account, so if your tax money, your owner's pay money, your profit money was all in this account with it, you would run payroll because you probably have enough cash in the account, and then you'd be frustrated because there's not enough to pay you, or there's not enough to pay the tax estimate, or there's not enough to pay off the credit card. So by dividing it out, if we look and we see, oh, OpEx doesn't have enough to cover the credit card payment, that's telling you here's the problem, how am I gonna solve it? Not pay off the credit card, and then later you another problem arises because you did that. So that's the idea behind it. It's gonna create so much simplicity. If you are at this point of overwhelm, what I'm gonna recommend you do is uh you can do this one thing, and then if you want to stop listening to this episode and come back to it once uh you you feel like you got the bandwidth to take on some accounts, then that's okay. But if you do nothing else, go open a profit account. Go open one account, nickname it profit, start allocating just one percent of everything you make into that account. And you won't notice, you're not gonna miss that one percent. If you know 1% of 10,000 is $100. So if you are running the business on $10,000, you can also run it on $9,900. You'll be fine. But what you're doing is you're building this habit of setting profit aside into this account. So go do that, and then I hope you stay and listen to some of these other accounts that are gonna help provide clarity. But again, if you do nothing else, open that one account. All right, some of the other accounts that I think are these are gonna be the optional. So I know I say these are the ones that every practice must have. The idea is that every practice should have multiple accounts, and then here you can choose the ones that you need. Now, this first one I genuinely believe every practice needs, and that's an emergency fund. Um, you know, I I call this the vault. It's just an account where you have a cash nest egg of savings in case things get dicey, right? I recommend having about three months of uh expenses saved up in that account. So that's you know, enough to pay you, enough to pay your team, enough to cover all your expenses. So building up that savings uh and then setting it aside into this nest egg. It might be a good idea to have this account at a separate bank so you don't see it when you log into your banking app. Uh, I know some

Building A True Emergency Fund

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banking apps will even let you hide accounts if you want to, and so you're welcome to do that. But the key is out of sight, out of mind, move it over, make it untouchable, only dip into it in true, true emergencies. We don't want to lean into this account uh on the little thing. So, again, if you if you go to pay off the credit card and there's not enough to pay it off, I don't want the default to be, well, emergency, I'm gonna pull some money out of the emergency fund. No, we're gonna try and get innovative first and say, what is going on here? Why is it this way? Can can we maybe wait a few days until some more uh revenue comes in? Maybe an insurance provider is delayed and paying. And so uh we don't want to get into the habit of dipping into the the emergency fund, even if we're like, well, let me pull a little bit out, and then after the insurance company pays me, I'll put it back. No, we're not gonna borrow from it. This is a hands-off account for purely emergencies only, and and that would be one of your, let's say one of your largest insurance providers, something happens and they are 60 days behind on sending out reimbursements, and you just consistently don't have enough to pay out your team to do all these things, you might need to dip in your emergency fund then. If something dries up, if uh one of your therapists or PTs quits and then opens a practice across the street and takes all of their clients with them or patients with them, you might see a huge revenue dip, and that might be like, okay, we're we're in dire straits. So all of these things, but ultimately, emergency fund really is for emergencies. We want to hold on to it there. You can save for this using your profit. So, as I was talking about, the money in your profit account at the end of the quarter, half of it can go to you as a bonus, and then half of it can get transferred into your emergency fund to help you build up that savings. All right, another account that might be helpful. Uh, if you have debt, if you don't, you won't need this one. But if you do, it's a debt destroyer account. So uh years ago, I found myself just falling behind into credit card debt. And so I finally was able to stop the bleeding. You know, if it just the credit cards were just growing and growing every month, and before I knew it, I had what $25,000 in credit card debt. So I knew something had to change. So what I did was I opened an account called the debt destroyer, and I set a percentage that I of every dollar I made that got moved into this account, and then at the end of the

Debt Payoff That Actually Sticks

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month, whatever's in that account got dumped onto my credit card balance, and it all went straight to principal. And I used that to help me pay it all off, get everything cleared up. Um, but that's what the debt destroyer account is for. If you you can use again back to the profit distributions, you can use your profit distribution for this too. So you could take a smaller percent home for you as a bonus and then use some to pay down debt. You can look through your expenses. Maybe there's some expenses you could temporarily cut that you can then allocate a higher percentage over to debt destroyer. This account really is temporary. Now, the beauty is, and this is what I found, is you know, I think I was I was able to allocate like eight percent to the debt destroyer account, which is cool. And then when I got out of debt, I didn't need the account anymore. And then I had this extra eight percent that I didn't need in operating expenses or payroll, so uh I was able to allocate that to owner's pay and then to profit. So I was able to increase those accounts where the money is creating a direct benefit to me, the owner. Um, and then we do profit sharing for my team, so that also benefits the team when more money's going into that profit account. All right, since I mentioned profit sharing, I why not go ahead and talk about that account? I think a profit sharing account is another great account to have for your practice for your team. This is you have your profit, which is in an account. This one is to share with your team, your employees. So you have a certain percentage going into this account. What I love about this is not only do they get a bonus when you get a bonus, at the end of the quarter, you take what's in that account and divide it amongst your team, but they have buy-in for the entire practice's success. It's not about how many patient visits did I get this week, how many sessions did I have this week, how much money am I making, or yada yada. Yes, we want them to have uh individual goals and we want them to be ambitious and we want them to try and make money. But also, if the other therapist or

Profit Sharing That Builds Buy In

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the other PT or other clinician gets patients, that's a win for them. If you as a business introduce a new service where more money's coming in, that's a win for them. So they have buy-in to the success of the entire practice, and that's what I love about it. So they get bonuses based on it, so you're cutting them in on it. You can decide how you want to divide that money up, whether you think you know the the fully licensed people get a certain amount and then the admin gets less and etc. Um, or if you just want to even split it between everybody, I tend to even split because it's just easier, uh, but totally up to you how you want to do that. But the profit sharing account is fantastic, it's one of my favorites. All right, let's talk about the drip account. So I use this uh when I I already told you about the season when I got into that credit card debt. Well, what led to that, uh, and maybe this wasn't the only factor, but it definitely didn't help, was we would take, and we still do, we take our coaching program is a six-month program, and so most people pay monthly, they just pay month to month, it's a subscription, but some people choose to pay up front for the six months for a discount, which is great. Well, yeah years ago, people would do that, and you know, when I was a solopreneur and somebody did that, I would just take the money and cool, and I would allocate it to my accounts immediately, and and there it goes. Well, as I had a team and people would pay up front, when I did that, suddenly

The Drip Account For Prepaid Plans

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the money was would get spent because Parkinson's law, uh, I would spend it, and lo and behold, I'm paying this employee to work with this client, but they're not there's no money coming in from them anymore because I spent it all up front. So what I decided to do is take that payment and treat it like it's a monthly payment. So I put it into this account called the Drip Account. And if somebody paid me $6,000, right, uh then I would instead of allocating that whole thing through all the accounts, I'd put it into the drip, and each month for the next six months, I would take a thousand of it, move it into my income account, and then divide it across the other accounts. So I'm treating it like that person is paying me monthly payments, even though they paid me up front. And so, you know, we have a handful of clients who do that. So we got a chunk of cash sitting in the drip account, and then it's usually my last allocation of the month is when I personally do it, but I will move, I will take whatever I need to from the drip account to cover those those clients' payments, drip it through, and then when I run payroll, that what I just dripped out that portion of their payment is there to cover my employee for working with them, for coaching them. So the drip account honestly saved me. So for those of you who are who sell things sessions in in packages, who have different services where you maybe you collect money up front for 10 sessions, set it aside into a drip, and then every time that person comes for a session, you can just move the per the portion of it into your income account and then let it flow through. So the drip account is one of my favorites. Uh, you can have we'll say growth accounts. So these accounts are can be you can have one for employees. So if you're thinking about making a hire and you're nervous about whether you can afford it, create an account, nickname it employee account, practice paying that employee before you ever hire them. Uh, you can do it for a new building if you're wanting to open a second location, start setting aside the rent for that location, even before you move in into this other account. This can do multiple things. Not only does it help you figure out can we afford to do this um right away? Now, I I get it. If you hire a therapist, then once they get a caseload, they're gonna be making you more money, which will make it easier to afford them. But if we can afford them before you hire them, that's such a good litmus test of that level of risk because we all know it takes

Growth Accounts For Hiring And Expansion

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a while to build caseloads, it takes a while to train them. What if they come on board and you're paying them and then they quit, and then you have to hire somebody else? And so you maybe you have three to six months of paying somebody who's not generating revenue. And so we want to make sure that you are covering all your bases. So practice that. And the beauty of practicing it is even if all the money doesn't stay in there, you have a cash nest egg. So when you do hire them, that whole thing we were just talking about, they're not making you money when you first hire, now you have a cash cushion in this account to help offset that. Or when you move into that second location, while you're building up the patient load over there, you have a cash nest egg to cover the rent and the utilities and the expenses associated with that added expense. So uh growth accounts can be used for anything, truthfully. If there's a piece of equipment you want in your in your clinic, if there is um anything that you're trying to accomplish, uh can be used. And you just nickname these accounts, and then once you reach that goal, you can uh re-nickname it something new and continue to save into that account. Uh, a couple more I'm gonna go through. The professional development account uh is another one. So if you like to invest in yourself, whether it's going to conferences, whether it's um taking courses, whether it's hiring coaches, whatever it is, uh, this is really good to have. A lot of times, those are the things that fall to the wayside. Um, you know, I'm not talking about just the required continuing education things, but that can be part of it. But truthfully, how do you invest in yourself? And it can be personally too. Do you want to take maybe because you can just take it home as a distribution and use it for a gym membership or hiring a personal trainer or starting a new hobby, whatever you want to do to invest in yourself? Um, I like this professional or personal development account. You can have a retirement account. This is for you. If you need to set money aside for an IRA, um then great, open up an account, allocate a percentage there so that way you are just intentionally saving for it. Sales tax is another quick

Development Retirement And Sales Tax

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one. If you sell products, I know a lot of you do not, but if you do, if you sell products of any kind, you have to be collecting sales tax. Set this money aside immediately. The second if you sell a $50 product and there's a 5% tax on it, that's $2.50. So um what you would do is you would they would give you $52.50, $2.50 is gonna immediately go into your sales tax account. You are holding this money, you're collecting this money on behalf of the government. It's not your money. One of the biggest mistakes people make with sales tax is it gets mixed up with their money, and then when it's time to pay the government what you collected, you don't have it or you don't have enough. So please, the second sales tax comes in, immediately move it out of your hands into its own account so that you don't run into issues. All right, that is all of the business accounts. There's plenty, plenty more, but these are the ones that I really wanted to touch on that I think are super, super important. Um, if you can think of any others, if you're using any other accounts, I would love to hear about them. But if nothing else, remember, go open that profit account, then open those core accounts. If you just want to stick with the sixth, that's great. But if one of these other ones resonated with you, if you're like, man, I would love to have a drip account. We take so many upfront payments and we keep finding a cash crunch because of that, give it a try. And if you need help setting up any of these accounts, if what I just said overwhelmed you, you were like, I love this, but I'm overwhelmed by it, reach out to one of our coaches. We would be happy to walk with you on this. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review, and share it with a practice owner that

Wrap Up And Next Steps

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you may know. If your practice needs help getting organized with finances or just growing your practice, head to therapybusinesspod.com to learn how we can help you.