Finances

Video Transcription

[MUSIC PLAYING] Outside of ethics, finances are the most stressful areas faced. Good financial management started with the business plan. You did create a business plan, right? Of course you did. So the financial management spelled out in that business plan must be practiced on a daily basis.

It's enticing to purchase all of those items that fulfill your business vision and mission during the startup, including that bust of Sigi Freud, but they may not all be necessary, except for that Freud statue. Keep that.

Depending on the amount of time working, business connections, and insurance paneling, it can take between six months and three years to run at full capacity. So with that said, here are the specifics that we will be covering in this lesson-- business banking, budgeting, tracking expenses and profits, financial policies and procedures.

So it's advised to have a business banking account. A business credit card or debit card also can be helpful for tracking expenses. It can also be helpful for paying rotating bills, such as rent, internet, and utilities. In order to apply for a business banking account and/or a credit card, you will need a tax ID number and may need to supply a copy of the IRS paperwork to the bank to obtain the account. So it's not advised to mix personal and business finances. The reasons include the following-- forgetting which category the expense goes, errors on tax returns may cause an audit, may overspend money necessary to pay bills, may not keep good track of profit.

It may pose confidentiality issues. So if you're married and deposit business checks into your joint account, your partner can see the names of the checks that are being deposited into the bank account. And that's a confidentiality issue, right? Yeah.

A global budget should have been created during the business plan phase of the business startup. Now although some expenses can be anticipated, such as rent, utilities, licensing fees, and other expenses, there are unanticipated costs, such as computer repairs, furniture replacements, and carpet cleaning after the last play therapy client threw up all over the floor. So as you become aware of new or additional fixed expenses, it's important to update the budget to incorporate these expenses. A good business policy is to make more than you spend. And if you cannot or do not see enough clients to cover costs for the month, you'll need to determine ways to supplement your income.

So let's talk about insurance payments for a minute. So when billing insurance, you will need to budget several weeks-- let's say 2 to 12 weeks-- that is for receiving payments from the companies. Thus, a client seen today may not have a payment arrive for over a month. On rare occasions, payment can take up to a year. So try this-- call your credit card company and say, hey, I'll get to those payments in a year, and see what they say. Well, my point being that it's important to file claims in a timely manner.

And in order to be paid, you need to anticipate the time gap between. Many insurance companies allow between 90 and 360 days to file a claim. And if a claim is filed outside of the timely filing period, it's not paid. So a good rule of thumb is don't let a client's bill accrue beyond a single session. Also, you may want to accept credit cards via a system such as Paypal or the Square.

It's critical that you not only track expenses and profits, but you do it on a consistent basis. Tracking expenses, insurance payments, client deductibles, and copays and co-insurance is quickly overwhelming. There are many different types of free and paid software programs available to help track expenses and profits. A beginning solution can be a secure cloud-based system that you have access to anywhere.

Note that it's important to develop a system that allows for recording of multiple entries for each client, such as the following-- date and amount of copays collected, date billed to insurance companies, date when insurance payment is collected. It may also be necessary to hire really big dudes with anger management issues to collect client balances-- OK, I mean, a collection agency. Collection agencies tend to be the last resort, but sometimes they are necessary.

It's important for you to have explicitly written policies and procedures regarding cost of counseling sessions, collection of fees, and means of payment. Note that you should have all patients sign a form indicating that they understand the policies and procedures. It's common for counselors to have soft hearts and allow client bills to accrue or write-off client bills. This is bad business practice and does not result in financial accountability for you or for the client.

It's also insurance fraud to not charge a client the required deductible, copay, or co-insurance as you signed in an agreement with the insurance company when they paneled you. A sliding scale policy is permitted, but you cannot take insurance and accept a sliding fee at the same time. As a resource, here's a website for a government sliding scale program.

It's ultimately up to the business owner's responsibility to enforce the financial policies. So lose that discomfort in talking about money with clients. It's great to be able to help people, but if you don't have enough money to pay business debts, you will not have a sustainable counseling practice.

So here's what we covered in this lesson-- first, business banking; next, budgeting; tracking expenses and profits, financial policies and procedures.

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