How to Manage Money as a Cash Based Practice Owner
Updated: Nov 26
When starting a cash based practice, you take on several responsibilities aside from just treating patients. One of these is money.
During my time as a business coach helping cash based PTs, OTs, SLPs, and other healthcare providers start, launch, and grow their own practices, there are key concerns they have when it comes to business finances:
How to be good with your money
How to never worry about money
And how to achieve financial success
Speaking from experience, it has taken me some time to find a financial routine that helps me feel comfortable managing the money my business brings in. During this post, I plan to share my monthly money meeting routine in hopes that you find it helpful too.
Basic Finances for the Cash Based PT
If you've been following me for a while, you've probably gathered that I enjoy reading. A lot of the information I've learned as a business owner has come from great books written by great authors. My business finances have been no different.
A lot of what I've learned about handling money, both personally and professionally, has come from the book Profit First by Mike Michalowicz. This book seems to be one of the top money management books for entrepreneurs, and I would agree that his strategies work well for the cash based practice owner. Full transparency, this book is what I based my entire financial strategy off of, and also most of what I'm going to share with you during this post.
So, if you haven't had the change to read it yet, I would encourage you to at least look up a summary of it. The long and short is that it helps give structure and a step-by-step checklist to handling money as a business owner, including how to pay yourself.
My Monthly Money Meeting
Through some trial and error, I've determined that having a single monthly money meeting is what works best for me and my business. I began with a doing a money meeting twice per month, but it was too complicated for me to keep up with. To this day, I complete my monthly money meeting on the first day of each month, or as close to it as possible if I happen to be unavailable on that specific day.
I typically block out about 2-3 hours of time in my schedule, which gives me the opportunity to go through both business and personal finances. The time it takes me is in part due to the fact that I work with several contractors, so it takes me longer making sure that I am paying everyone the right amounts. If you're doing a money meeting for yourself as the business owner only, this process might take you closer to an hour.
Paying Yourself
Over time working with other cash based practice owners in our coaching program, I've noticed that some tend to not pay themselves for a certain amount of time when working for themselves. While I understand that this can be challenging during the first couple of months being in business, it's really important to start paying yourself as soon as possible.
In my opinion, when you begin paying yourself as a business owner, it helps to put things into perspective. Mindset it huge in entrepreneurship and paying yourself helps you take your business more seriously as a full time job versus a side hustle. Of course, if your business is a side hustle, that is perfectly okay, too.
Learn more about mindset as a cash based PT in the blog post here.
The Money Management Process
It's important to point out that when creating my money routine, I developed a series of checklists of the process I complete every month. Creating this repeatable system for business finances has been a game changer. Each monthly money meeting, I pull up the checklist I've created and go through it without having to think. I encourage you to do the same.
Another tip to help your monthly money meeting go as smoothly as possible is to have the following softwares or systems set up for your practice:
A budget (I use YNAB)
A bookkeeping software (I use Quickbooks Self-Employed)
Business bank accounts
Income tracker (I use a Google Sheet)
Review the Budget
Once you have each one of the above open, you're ready to start your meeting. The first thing you want to do is look at your business' monthly budget. Review where you're at for the current month and compare that to the previous month as well. It can also be a good idea to go through your expense list to see if there happen to be any subscriptions or softwares you're currently paying for that you no longer need.
You can learn more about my cash based practice software recommendations in the blog post here.
Business Bank Accounts
The next thing to do is open up your business bank accounts. The Profit First method encourages you to have multiple business bank accounts, including three checking accounts and two savings accounts. As an example, my five business bank accounts are as follows:
Income checking account
Owner's pay checking account
Business expenses checking account
Taxes savings
Business savings
For starters, any income you receive is transferred to the Income checking account. This can be from multiple different payment processors depending on your payment preferences. From the Income checking account, you then disperse that total into the remaining four bank accounts based on a percentage you have pre-determined. Here are the percentages based on the Profit First method:
Owner's pay - 50%
Operating expenses - 30%
Taxes - 15%
Savings - 5%
Keep in mind that these percentages can be adjusted based on your business needs. For example, if your practice is online, out of your home, or in your garage gym, you may not have high overhead costs. That means you can reduce the percentage that goes into the operating expenses account and either pay yourself more or put more money into taxes or business savings.
It's Time to Pay Up
Once you have the total income dispersed as appropriate into your business bank accounts, it's time to start paying people. For example, I pay my husband (who is also a PT and part of my business), a virtual assistant, web developer, and assistant business coach.
I would encourage you when paying others to double check that you're sending the appropriate amount of money (you want to keep the team happy). From here, I pay any bills or other expenses from the operating expense account. Finally, I pay myself out of the owner's pay account.
Learn more about how much to pay yourself at the blog post here.
Conclusion
At the end of the day, you're wondering how to achieve financial goals for your practice, this is where I would suggest starting. Having a set money routine for your practice makes business finances a lot less intimidating and also keeps you organized throughout the year for when tax time comes around. Not to mention the fact that you can plan on paying yourself every month, which can be pretty rewarding as a business owner in itself.
Listen to the episode on my podcast!
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