You invest major time and energy into your therapy practice. An economic downturn drains your resources in more than just a financial sense. When economic instability is in the forecast you may find yourself stressed, overwhelmed, and anxious about the future of your business.

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To dial down the stress and keep your practice on an even course, it’s important to be proactive. Taking steps now to prepare for future economic ups and downs not only helps you weather the storm ahead, but empowers you as a business owner and gives you a greater sense of control.

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Here’s how to do it.

Get financial reporting locked in

If you already have a bookkeeping system in place and you’re generating monthly profit and loss statements (P&Ls) and balance sheets, then congratulations—you’ve taken the first, essential step to gaining control over your practice’s finances.

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On the other hand, if you’ve fallen behind on bookkeeping, or if you’re coasting along with a DIY solution and without financial reporting, consider this a wakeup call.

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Financial statements measure the pulse of your business, tracking revenue, expenses, assets, cash flow, working capital—all the key data you need to track your profitability and make financial decisions.

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Taking the time now to set up a professional bookkeeping solution pays off in the long run. You’ll get the information you need to plan your practice’s future and follow the steps below.

Diversify income streams

The more diverse your income streams, the more protection you have against downturns in the market. When one source of income begins to falter—either because of decreasing demand, or because clients are tightening their purse strings—the others are there to pick up the slack.

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The Complete List of Income Streams for Therapists breaks down the most profitable means of earning revenue for your therapy practice, with details on how to expand your practice to include each.

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Some of the most popular options:

Group therapy 

With lower individual session fees, group therapy may be more accessible to clients than one-on-one sessions. It can also serve to supplement treatment for clients who already have a one-on-one therapist.

Workshops, webinars, and online courses 

Delivering therapy education online—either to clients or to other therapists—comes with low overhead: only the time needed to prepare materials. It may be a profitable sideline if your practice is already telehealth-focused.

Credentialing

If you have avoided certain insurers because of their low reimbursement rates, now may be the time to reconsider. If your revenue dwindles in the future, referrals from providers can fill gaps in your client list even if reimbursements are less than ideal.

New niches

Are you considering taking your continuing education in a new direction? Or is there a particular type of client, condition, or modality that has caught your interest? Expanding into new niches—and marketing your services to new audiences—may help you find new clients and increase demand.

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As well as the complete list linked above, check out How to Diversify Your Income Streams as a Therapist. It focuses on key factors to consider while diversifying your revenue.

Strengthen client relationships 

Your clients already value your service—otherwise, they wouldn’t keep coming back. But taking steps to strengthen your relationships with clients improves retention. And it keeps you top-of-mind when the individuals you treat are reviewing their own monthly budgets and deciding which expenses to cut and which ones to keep. 

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Some suggestions for building those relationships:

Flexible fees

Review your budget and determine how much wiggle room you can afford with your hourly rates. Then, if a client is expressing anxiety about their economic situation, be prepared to offer that minimum charge on a temporary basis. Being flexible with your fees helps to retain clients who might otherwise churn, and builds healthy long-term connections. What you lose in cash flow now helps to guarantee income in the future.

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Learn more with How to Set Your Fees in Private Practice (Plus 3 Mistakes to Avoid) and  How to Talk About Money with Your Therapy Clients.

Provide out-of-session support

Checking in with clients between sessions can act as a value-add for your services while demonstrating your investment in their treatment. In the interest of maintaining a healthy therapeutic alliance, these check-ins should serve a formal function—they’re not social calls. 

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For instance, if there’s a typical course of CBT treatment that you provide, including take-home work, you could draft template emails to send to clients in between sessions. Each email might include cues for reflecting on the work they’re doing, and an offer for support if they have any questions. Out-of-session support doesn’t need to be elaborate—just a reminder that you’re there to help.

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But be realistic in how you plan to spend your time and energy. If you’re already carrying a full caseload, out-of-session support may not be realistic. And check in with yourself periodically to make sure you’re not biting off more than you can chew. Your health comes first.

Launch a client-only newsletter

A small, regular newsletter sent only to current clients helps to cultivate a sense of care and attention and—not to put too fine a marketing point on it—exclusivity. When they know they’re only one of twenty or twenty-five people receiving these updates, a client may feel more connected to you and your practice.

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Your clients-only newsletters don’t need to be long or complicated. Consider including a bit of timely or seasonal mental health inspiration, or a quote; any relevant updates about your practice or your availability; and a few links to resources you find broadly appropriate for the people on your client list. 

Start an emergency fund

It’s never too late to start an emergency fund for your therapy practice. Even if you can afford only to make small contributions each month, your savings can help to cover expenses in the event of decreased revenue. 

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When money is tight, a small fund—enough to cover one month’s worth of expenses—may save you from relying on credit or other less-than-ideal solutions to keep the lights on.

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To start an emergency fund:

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1. Set a goal for saving (eg. enough savings to cover three months of expenses)
2. Review your total liabilities, making plans to pay off debt while also setting aside savings
3. Settle on a method for determining your contributions (eg. ten percent of your annual revenue)
4. Open a separate savings or certificate of deposit (CD) account for your funds and start making deposits

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That’s just a bare outline. For a full how-to guide, check out How to Build an Emergency Fund as a Therapist.

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Negotiate with insurance companies

Many therapists find themselves under financial pressure because of low reimbursement rates from insurance companies. But only a fraction of them contact those companies to negotiate higher rates.

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Even a small increase to insurance reimbursement rates from one or two companies can increase your monthly revenue. With the extra funds, you can build up emergency savings and make ends meet when money is tight.

When to negotiate with insurance companies

The longer you have been paneled with an insurance company, and the more frequently you file claims, the more valuable you are to them. If you have been on an insurance panel for just one year, it’s unlikely that the company will agree to increase your reimbursement rate. On the other hand, if you have been paneled with them for ten years, your chances will be much better.

What to avoid while negotiating higher rates

When negotiating higher rates with an insurance company, avoid:

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• Presenting an ultimatum. Not only is threatening to leave an insurance company unlikely to sway them; if you’re forced to follow through, you could lose income as a result.
• Focusing on your own financial situation. For the most part, financial pressures you face have little impact on an insurance company’s decision. Instead, focus on the value you give them as a provider.
• Threatening to leave with other therapists. Pressuring an insurance company as part of a group of other therapists may put you in violation of the Sherman Act, resulting in large penalties and potential jail time.

How to write a reimbursement increase request letter

Your request for an increase should take the form of a formal letter. In most cases, you will be required to submit it by mail.

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In your letter, highlight the value you offer as a therapist, including:

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• The ability to treat patients in multiple languages
• Any expanded offerings or increased accessibility to clients
• Professional and educational developments
• Recent growth of your practice, including new staff

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How to Negotiate Higher Rates with Insurance Companies as a Therapist provides a detailed, step-by-step guide to requesting an increase, plus templates you can follow for drafting your letter.

Build a responsive budget

New business owners, in particular, tend to think of a budget as something they set and forget. That is, they build their budget, do their best to stick to it, and otherwise let nature take its course.

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But for your budget to really function well, and carry you through economic ups and downs, it needs to be responsive. 

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That means not only taking time to report on your budget—comparing how much you actually earned and spent with the amounts set in your budget—but putting systems in place to modify your budget as needed so it responds to your business’s needs.

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Incremental budgeting and zero base budgeting (ZBB) are two methods used in business to create responsive budgets. There are other approaches, too—like envelope budgeting and profit first—that may suit your needs.

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How to Build a Budget for Your Therapy Practice is an essential guide designed with new business owners in mind. The Complete Budgeting Guide for Therapists expands on it, introducing personal budgeting and exploring different budget methods.

Consider profit first accounting

Profit first is a comprehensive system for managing your personal and business finances—including your practice’s budget—in a way that prioritizes your personal earnings. One of its chief aims is to cut down on unnecessary business expenses.

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Both by reducing expenses and making sure you earn enough to cover your personal costs, profit first can help you keep an even keel in times of economic uncertainty.

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To set up profit first, you organize your revenue and expenses into separate bank accounts. Then you follow a set schedule for disbursing funds to the different accounts. Each account has a particular level of priority. Essential costs—like tax withholdings and payroll—come first. Then comes profit, and after that, other expenses.

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It can take some time to set up profit first, and you may need to modify your financial habits and iron out any wrinkles to get it running smoothly. But many therapists successfully use profit first to build sustainable, resilient practices. 

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For a deep dive, check out The Complete Guide to Profit First for Therapists.

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Speed up your cash flow

When cash flow is slow, you may be forced to dip into savings or use credit cards to cover your expenses. And unpredictable cash flow can make it difficult to budget and plan. During periods of economic downturn, that can put you in a precarious position.

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Delays with payment processors and slow reimbursement from insurance companies are both major contributors to slow cash flow for therapy practices.  

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Speeding up cash flow means making your revenue lands in your bank account as soon as possible. 

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A few suggestions:

Sign up for advances from your payment processor

Some payment processors now offer you the opportunity to be paid immediately after a client pays their bill. 

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There is typically a limit on how much advance payment you can receive. Also, your processor may charge a percentage for the service. But if slow cash flow is putting pressure on your practice, it could be a sacrifice worth making.

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Take some to shop around for alternative payment processors, too. Competitors may offer higher limits or better rates.

Automate insurance claims

If you sign up for a practice management platform, it may include tools for automating insurance claims. 

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With automated claims, you’re less likely to make mistakes when filing that lead to delays. Filing claims is also faster and easier, and the sooner you file a claim, the sooner you get paid.

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Even if automated claims filing costs you money out of pocket, you may find it worthwhile in order to speed up your cash flow and ensure you have operating capital when you need it.

Schedule your recurring expenses

Simply rescheduling your recurring expenses can help to nip cash flow shortfalls in the bud. Depending on your providers, you may be able to schedule payments for utilities, internet service, and software subscriptions so they are charged to your account at a time each month when you have the cash to pay for them.

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For example, if your payment processor distributes funds near the end of each month, but your bills for utilities, internet, and software are all due at different points during the middle of the month, you may often find yourself coming up short when it’s time to pay expenses. By rescheduling your payments so they come out at the beginning of the month, you guarantee you have the previous month’s cash pay earnings on hand to cover them. That leads to fewer unexpected shortfalls and a more predictable cash flow.    

Automate your backoffice to open up more clinical hours

The more clinical hours you have available to spend treating clients, the larger your client list. That makes your practice more resilient.

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A larger client list not only provides you with more revenue, so you have extra income to set aside as emergency funds. It also means you can afford to lose clients during an economic downturn. 

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Most self-employed therapists can manage 20 to 25 session hours per week. Their remaining time is spent on backoffice tasks—notes, scheduling, emails, insurance claims, superbills, accounting, and other administrative tasks.

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By automating some of these, you free up more time to focus on your clients and build a list that keeps your practice in the black. Freeing up even two or three hours per week could lead to a significant increase in income.

Bookkeeping and accounting

A financial platform like Heard saves you time spent on day-to-day bookkeeping, while providing professional support to guarantee a drama-free tax season. 

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Plus, with always-up-to-date financial reporting, you get the information you need to make important business decisions. That not only saves you time, it saves you mental and emotional energy that you can devote to building your client list.

Scheduling and emails

Scheduling automation helps you break the cycle of constantly checking your calendar, moving around appointments and tasks, and all the extra work it demands.

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For scheduling, consider Skedpal. Its time-blocking approach combines similar tasks into focused work periods so you can complete tasks distraction-free.  

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Numerous writing tools help speed up the task of responding to emails, and many let you build templates that you can reuse for common tasks. Jasper AI, Writesonic, and Grammarly are a few of the most popular options leveraging AI.

Insurance claims and superbills

Many all-in-one practice management platforms include insurance billing automation and tools for generating superbills. One of the most popular is Jane, which includes tools for tracking claims and direct billing a number of providers.

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Other insurance-specific options like Thrizer can speed up your billing cycle, reimbursing you immediately for claims you file as an out-of-network therapist.

Notes

A number of HIPAA-compliant AI tools for note-taking have cropped up in recent years. They promise to drastically speed up the process of writing and organizing notes.

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Some, like Mentalyc, Blueprint, and Upheal record and transcribe client sessions, then generate notes based on the data. Many of these tools produce notes that comply with clinical documentation standards.

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If you prefer not to have sessions recorded, other general note-taking apps allow you to dictate your notes and produce organized documents.

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Whichever option you choose, be sure to confirm that it complies with HIPAA requirements for protecting patient information. 

Key takeaways

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• Proactive financial systems—like reliable bookkeeping, responsive budgeting, and profit-first accounting—give your practice stability during economic uncertainty.
  
  
• Diversifying income streams and strengthening client relationships helps protect your revenue when individual session demand dips.
  
  
• Building an emergency fund and negotiating higher insurance reimbursement rates provides crucial financial cushioning during downturns.
  
  
• Speeding up cash flow through better payment processing, automated insurance claims, and rescheduled expenses keeps your practice running smoothly.
  
  
• Automating backoffice tasks frees up more clinical hours, allowing you to grow your client list and reinforce long-term practice resilience.

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For more in this series, check out:

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• How to Manage Cash Flow in Your Private Practice During Uncertain Times
• How to Diversify Your Income Streams as a Therapist
• How to Protect Your Therapy Practice During Economic Uncertainty

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 

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Bryce Warnes is a West Coast writer specializing in small business finances.

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