Even if your therapy practice is brand new, you may benefit from hiring an accountant.
A small business accountant can handle everything from filing your tax return to helping you make long-term plans. They can help you save money and find ways to run the financial side of your therapy practice more efficiently.
Here are seven steps to follow when hiring an accountant for your therapy practice.
Make sure you understand what an accountant does
Before you start shopping around for an accountant, it’s important to make sure you understand what they can and can’t do for your therapy practice.
A small business may hire an accountant to help them:
- File their taxes accurately and on time
- Identify and take advantage of tax deductions
- Depreciate expenses
- Plan how to use tax credits
- Create business plans
- Choose a business structure
- Interpret and analyze financial reports
- Create financial projections
- Make plans to expand their business
- Prepare for economic recessions
- Plan how to take advantage of new business opportunities
- Set up payroll and prepare to hire staff
- Sell their business
- Attract investors to their business
Some of these may be relevant to your therapy practice now, some may be relevant to it later, and some may not be relevant at all. But if you’re planning any important financial undertaking, a small business accountant is a powerful asset.
Accountants vs. bookkeepers
An accountant works from the assumption that you’re already recording financial data about your company, and that it’s accurate. That data includes records of:
- Income (each time your practice earns money)
- Expenses (each time your practice spends money)
- Assets (items of cash value your practice owns)
- Liabilities (money your practice owes)
- Equity (investment in the practice)
If you don’t have any of this information, you shouldn’t be concerned with hiring an accountant. First, you should hire a bookkeeper.
A bookkeeper records and categorizes your practice’s business transactions on a daily basis. They may also use that data to generate financial reports. In turn, your accountant uses that information to file taxes, create financial projections, and so on.
Read more about the difference between an accountant and a bookkeeper.
Look for signs your therapy practice needs an accountant
It can be hard to say exactly when you should start looking for an accountant for your therapy practice, but keep an eye out for the following indicators or milestones.
It’s time to book a meeting with an accountant when you:
- Make a major error filing your taxes
- Find tax season has become overwhelming
- Owe back taxes, but aren’t sure how you’re going to pay them
- Are being audited
- Need help planning a budget for your therapy practice
- Need to find ways to reduce expenses, but don’t know where to start
- Plan to rent a new office space, and aren’t sure how it will impact your month-to-month finances
- Plan to hire your first employee and set up payroll
- Want to change business structures
- Intend to partner with another therapist, and start a group practice
- Need to create a business plan
Identify your therapy practice’s accounting needs
Once you’ve reached a point when you know you need an accountant’s help, it’s time to think about what kind of accounting support your practice needs.
Many small businesses have a bookkeeper to support them with day-to-day financial tasks, and only go to see an accountant during tax season. Their accountant helps them identify deductible expenses, files their taxes for them, and charges a one-time fee.
In some cases, a business may be dealing with an ongoing situation that requires continuous support, in which case they may hire an accountant on retainer. Examples include businesses that are being audited, or planning a merger or sale.
Finally, there are many accounting firms that provide both bookkeeping and accounting services. In that case, a business typically pays a monthly fee that covers both bookkeeping (recording and categorizing transactions) and end-of-year tax filing.
In that case, if the business needs extra support—to file articles of incorporation, for instance—they can expect to pay an additional one-off fee on top of their monthly subscription cost.
What is a certified professional accountant (CPA)?
All certified professional accountants (CPAs) are accountants, but not all accountants are CPAs.
To become a CPA, an accountant must pass a standardized, four-part exam administered by the state where they practice. They may also be required to pass an ethics course.
On top of that, a CPA must have a minimum of two years experience as a professional accountant, as well as a bachelor’s degree.
A CPA will typically charge more for their services than a non-CPA accountant. One of the reasons small businesses typically work with CPAs is because it confers an image of professionalism and trustworthiness. For instance, a wholesaler may be more willing to extend credit to a retailer who has a CPA working for them, as opposed to one who does not.
Determine your therapy practice’s accounting budget
Once you’ve determined what kind of support you need from an accountant, it’s time to figure out how much you can afford to pay.
As a rough guideline, the cost of hiring an accountant starts at $40 per hour. This varies from state to state and city to city. Other factors also affect an accountant’s rate—such as how many years of experience they have, or specialized areas of knowledge.
In some cases, an accountant will charge a flat fee for a particular service. For instance, hiring a CPA to do a normal tax return for your business could cost $375 to $500.
In other cases, an accountant will apply their hourly rate. Meaning, it’s difficult to discuss the price of hiring an accountant in the abstract. The amount you pay will depend upon the individual accountant’s hourly rate, and how long it will take them to complete a particular task for you.
Any qualified accountant you meet for a consultation should be able to quote you a price range for a particular task.
Consider alternatives to hiring an accountant
If you need to prepare financial reports, file your taxes, and calculate and make quarterly estimated tax payments, you can hire an accountant to help you. However, there are less costly alternatives worth exploring:
- Accounting software: Self-service tools like Xero or QuickBooks Online can help you manage basic accounting tasks, so long as you invest the time learning how to use them.
- Complete bookkeeping and accounting solutions: Increasingly, remote solutions like Heard are able to provide your business with a remote team that handles all your bookkeeping, financial reports, and tax filing for you, for one flat monthly rate. Heard specializes in helping therapists.
Choose a single accountant or large firm
If you decide to hire an accountant, you will need to either hire a single-accountant firm or a larger firm with many accountants working for it.
A single-accountant firm typically consists of one accountant, plus one or more office administrators. It may also employ a bookkeeper, so the firm is able to handle both bookkeeping and accounting tasks for clients.
A large firm like H&R Block has many accountants working for it—sometimes thousands. When you hire a large firm, you may have a single individual managing your account, and working with you face-to-face. But your actual tax preparation and other accounting tasks are handled by a team of accountants.
The benefit of a single-accountant firm is that you get one-on-one support from the professional doing your accounting. They will get to know your business over time, and may be able to provide more in-depth advice particular to your situation.
The benefit of a large firm is that it may cost less, at the expense of one-on-one, personalized support.
Interview prospective accountants for your therapy practice
Before you hire an accountant, you should be prepared to ask some questions to make sure they’re a good fit for your business.
Some smart questions to ask a prospective accountant include:
- What is your fee?
- How long have you been in business?
- Do you work with any other therapy practices? If so, what are some unique challenges therapy practices face, and how do you address them?
- What is your philosophy when it comes to tax filing? Would you consider yourself more assertive (taking advantage of every deduction possible) or more cautious?
- What kind of software do you use?
- How do you prefer your clients to provide financial information? Eg. as email attachments, imported directly in software, as hard a hard copy on a USB stick, etc.
- What security measures do you use to make sure your clients’ financial data is safe?
Any qualified accountant should be prepared to answer these questions. It’s a good idea to speak to several accountants before choosing one.
Finally, one of the best tools at your disposal when looking for an accountant is referrals from other therapists. Reach out other therapists in your network, and see if any of them can connect you with accountants specializing in therapy practices.
An accountant can help you identify deductible expenses, and save money on your taxes. But you don’t need to hire an accountant to take advantage of tax deductions right away. Check out our complete list of tax deductions for therapists.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.
Bryce Warnes is a West Coast writer specializing in small business finances.