QuickBooks for Therapists: A Step-by-Step Guide
Why should you set up QuickBooks Online (QBO) for your practice?
Monthly bookkeeping is crucial for keeping your therapy practice’s finances in check. When you maintain excellent records, you can:
Maximize your tax deductions
Understand how much cash you have to run your business
Track patient and insurance billing seamlessly
Stay HIPAA compliant
Reduce your stress
Setting up QuickBooks for therapists can streamline your bookkeeping process, saving you time and reducing errors. There’s a reason why QBO is the most popular accounting software on the market—it is a powerful tool that can help ensure your financial records are accurate and up-to-date. QBO grows as your practice grows, enabling you to add features and users, and scale your practice without needing to adopt new software later on, which can be time-consuming.
Who might not be a good fit for QuickBooks?
QBO may not be the best fit for every practice. For example, if you have extremely simple finances, a basic spreadsheet might suffice. Alternatives like Xero (less robust, but cheaper than QBO) or FreshBooks (has a free, basic version) could also be considered depending on your specific needs.
If your transactions are easily kept on a spreadsheet in a way that allows you to know what income you generated and what you spent money on each month, that simple approach will work until your practice expands. If your budget does not allow for an additional $30-$60 per month expense for a QBO subscription, consider the alternative software mentioned above.
However, if you are ready to begin setting up QuickBooks for the first time (or are simply reviewing your settings), this guide will walk you through the essential steps. Once complete, you will be able to review your income and expenses and understand how much profit your practice is generating!
QuickBooks for Therapists: Comprehensive guide with video tutorials
Selecting the Correct Subscription and Creating Your Account
Choosing the right QuickBooks subscription is the first step. QuickBooks offers several subscription options tailored to different needs. Unless you have employees, Simple Start or Essentials will have all the features you need.
Simple Start ($30/month): Best for solo practitioners wanting to organize the finances.
Essentials ($60/month): Suitable for small practices needing to pay bills and track time.
Plus ($90/month): Ideal for growing practices with multiple therapists and more complex needs.
Advanced ($200/month): For larger practices requiring detailed reporting and advanced features.
Steps to Create Your QuickBooks Online Account:
Go to the QuickBooks plans and pricing page.
Select the subscription plan that best fits your needs. If unsure, I suggest starting with a more basic option and upgrading later if you need additional features.
Click "Choose Plan," and follow the prompts to create your account. Enter your business information as accurately as possible.
QuickBooks for Therapists: QBO subscription selection and initial set up steps.
2. Completing Your Company Settings
Setting up your company information correctly is crucial for accurate financial reporting and compliance. Ensure all your company details are complete and accurate in QuickBooks Online.
Steps to complete your company settings:
Click the Gear icon at the top right and select Account and Settings.
Complete all sections under Company, Billing & Subscription, Usage, Sales, Expenses, Payments, and Advanced.
Ensure your business name, address, and contact information are up-to-date.
Configure your fiscal year, accounting method, and other preferences – if you have questions on this ask your bookkeeper or CPA
QuickBooks for Therapists: Configure your company settings.
3. Importing an Industry Standard Chart of Accounts
A chart of accounts is a list of all accounts used to categorize transactions. Using a chart of accounts geared towards therapists ensures that your financial data is organized and easy to manage. Beware of adding too many accounts or having too little since it will become difficult to measure your performance and ensure you’re taking all deductions available to you on your taxes.
Steps to import your chart of accounts:
Download our free template for a therapy practice chart of accounts below.
Go to the Accounting tab on the left menu and click Chart of Accounts.
Click on New to manually add accounts or Import to upload a pre-made list.
Follow the prompts to map and import your accounts.
QuickBooks for Therapists: Importing and understanding the chart of accounts for therapists.
4. Connecting Your Bank and Credit Card Feeds
Connecting your bank and credit card feeds to QuickBooks Online is the first step to automating your financial transactions. This feature allows you to automatically import transactions, saving you time and reducing the risk of manual errors.
Steps to connect your bank accounts:
Go to the Banking tab on the left menu.
Click on Add Account.
Search for your bank and follow the prompts to sign in to your bank account.
Select the accounts you want to connect and click Connect.
Follow steps 1-4 for all business checking, savings, and credit card accounts you use.
5. Classifying Transactions in Bank Feeds
Classifying transactions correctly ensures your financial records are accurate and up-to-date. This process helps you track expenses, income, and other financial activities efficiently. At a minimum, this should be completed monthly.
Steps to review and categorize your transactions:
Go to the Banking tab on the left menu.
Under the For Review tab, you will see your imported transactions.
Review each transaction and assign it to the appropriate category from your chart of accounts.
Click Add to save the classified transaction.
QuickBooks for Therapists: Connecting bank feeds, categorizing transactions, and creating rules.
6. Running a Profit & Loss Report
The Profit & Loss (P&L) report provides a summary of your revenues, costs, and expenses during a specific period. This report is crucial for understanding your practice’s financial health.
Steps to generate your Profit & Loss:
Click on the Reports tab on the left menu.
In the Standard section, select Profit & Loss.
Choose the desired date range (use a range where you have classified all income and expenses from step 4.) and click Run Report.
Review your P&L to understand your income and expenses, and identify areas for improvement.
QuickBooks for Therapists: Running (and understanding!) a Profit and Loss Report.
Conclusion
Setting up QuickBooks Online for your therapy practice can seem daunting, but by following these steps, you’ll have a solid foundation for organizing your finances and understanding the health of your business.
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Still feeling overwhelmed? Reach out below to get professional help with your bookkeeping, billing, payroll, and CFO services specifically tailored to therapists. We are here to support you and the important work you do everyday!
