Published: January 31, 2024 by Zencare Team
A new year can present therapists the opportunity to reevaluate their private practice’s finances and check in on their budget — especially with tax season just around the corner. January is a natural time to take a deep dive into financial management, both personal and practice, and invest time and effort into financial planning.
Financial planning doesn’t have to be a paid service and it also doesn’t need to be stressful. We’re sharing some financial tools for therapists in private practice, covering topics like money-saving strategies, how to set your practice up for success, and helpful resources.
Assessing Practice Finances
To begin planning for the future, it can be useful to take stock of your practice finances in the present. While checking your bank account balance is a good start, the best way to take stock is a comprehensive review of what’s coming into your practice and what’s going out by reviewing bank statements line-by-line, as well as reflecting on the reasons behind those numbers.
To thoroughly assess your practice finances, consider the following questions:
- On average, how much do you earn per session?
- How much do you earn each week? Each month?
- How much money do you need to spend to keep your practice open and running each week? Each month?
- What items or services make up practice upkeep expenses?
- Where do you feel like you’re overspending?
- Are there any seasonal costs or expenses??
While you may be able to answer those questions off the top of your head, it can be eye-opening to reference your bank statements and calculate what’s actually happening. For example, you might find that your EHR is your biggest cost, that your clients have past-due payments, or that you’re actually not spending that much on marketing like you had originally thought.
The next place to turn your attention is towards areas for growth within your practice. These don’t necessarily need to be financially-focused to help you reflect on any changes you want to make. Ask yourself these questions:
- What worked well for you this year?
- What areas in your practice do you want to change? Why?
- Are you making enough money to support your desired lifestyle?
- What plans do you have for the profit made by the practice?
- How will you invest in your practice financially? What about other types of investments?
You might find it helpful to write down your answers to process your thoughts — this is also a great way to keep records of what’s happening for your practice. In a few years, it might be fun to look back at where you were today!
By analyzing your current financial situation and establishing the full picture, thinking through what’s next for your practice and what you need to do for personal and practice success becomes easier.
Investigating Cost-Saving Opportunities
Cost of living can have an enormous impact on private practices as well as on the therapists themselves. Many therapists find that they need to save money by reducing their expenses to remain profitable. They might realize, after their financial deep dive, that they’re overspending on practice upkeep, whether that’s the technology to support online sessions, office rent, marketing services, or more. While many of these expenses, upon first thought, seem necessary to keep your practice open, there may be ways to save on their costs.
Cost-Cutting Strategies
Cutting costs is never easy, but it is a worthwhile endeavor for small businesses including therapy private practices. To explore ways to save money, consider the following for your practice:
- Incoming clients: Having a steady stream of intake sessions with prospective clients means that your practice is set up for sustainable success, and marketing is a key part ensuring that you have incoming clients. Investing in ways to market to prospective clients doesn’t have to be a huge expense. Therapist directories like Zencare are a great, low-cost option for putting your practice in front of people looking for mental health services. Automating your marketing can also save you time, so that you have more space to take sessions (and bring in more income).
- Admin costs: Running a practice is all about getting the details down, which is why spending money on admin costs seems unavoidable. However, admin costs can become quite steep, particularly if they involve hiring admin staff to process insurance claims, schedule sessions, or pay invoices. With so many excellent tools for practice management in existence, exploring options for automating admin tasks can save you both money and time.
- Renting out your space: Rent is a huge cost for therapy practices, and unlike our homes, it can feel like that rent gets wasted when you’re not at the office. Subletting your office space to other therapists helps you with another stream of income without taking on additional work. Ditching physical space altogether and transitioning into a fully virtual practice can be another option when attempting to reduce costs.
- Miscellaneous costs: While offering a hot cup of tea before a session or having candles in the bathroom are excellent touches, they aren’t free and can run up your monthly costs. Taking a look at how much you spend on the “extras” in your practice can give you a glimpse into costs that can be cut, giving your practice a greater margin between income and expenses.
Budgeting Techniques
Healthy finances are supported by healthy budgeting techniques. Because managing money isn’t taught in mental health graduate programs, budgeting can be a stressful responsibility for a therapist. However, using effective budgeting techniques can make a world of difference when it comes to saving money on expenses while also increasing practice revenue.
To plan your practice budget for the year, check out Zencare’s Therapy Session Fee Calculator, which calculates just how much you need to charge clients per session when taking into consideration how many sessions you want per day, where you live, and your practice’s regular expenses. Reevaluating your session fee is even more important given the changes in cost of living over the past few years, as is reevaluating how much sliding scale sessions you offer. Having a solid rationale for increases — and having a way to try out different rates and see their impact on your budget — means feeling more comfortable when making financial decisions for your practice.
Clients may be willing to pay more for therapists who have certifications in approaches like Eye Movement Desensitization and Processing (EMDR), Brainspotting, Biofeedback, and others. Investing in additional training might pay off, if it means that you can charge more per session and increase your practice’s income.
To maintain a budget, there are many apps to use that can help you track income and expenses. Fortune offers a full list of The 10 best budgeting apps for 2024, including apps like PocketGuard, EveryDollar, Wally, and Simplifi. There are also many products out there for tax preparation, which includes free educational resources and free tax filing platforms.
Resources for Financial Planning
For a resource to be budget-friendly, it needs to make your job easier so you have more time for your work while also not being itself an expensive cost. Zencare offers Zencare Practice Management Solution as a cost effective EHR. For therapists who take private pay clients, using the Private Pay Booster is another great resource to increase your income, as it makes it easier to support clients’ use of insurance. Lastly, Zencare’s therapist directory is a low-cost way to attract new prospective clients your way.
Conclusion
Financial planning is a key activity for running a therapy practice, and when done effectively, can set up your practice for sustainable success and provide you with the income you need to enjoy your life outside of the practice.
By reflecting on your finances and putting numbers to ideas, you’ll establish a comprehensive understanding of your practice’s financial situation. Making decisions about where to save money and what’s worth the investment becomes a lot easier when you have the full picture.