What's the difference between profit and the cash in my account?
Profit is a measurement of activity over a stretch of time, usually a month. It counts what your practice earned by doing the clinical work and what it spent to make that work possible. Your bank balance is a snapshot of one moment, and it reflects when money actually moved. Both numbers are accurate. They are simply measuring two different things.
In a mental health practice, the biggest reason for the gap is usually timing on the money coming in. You hold sessions in March, and depending on the payer, the payment can land weeks later. Your profit and loss statement puts the March work in March, because that is when you earned it. The bank shows deposits whenever they clear. Practices that are all private pay feel this less. Practices with a mix of private pay and insurance feel it every single month.
Timing on the money going out matters just as much. An annual liability premium, a yearly EHR or software renewal, a new laptop, a loan payment. Those hit the bank in one lump even though the benefit stretches across the year. Loan principal is the sneakiest one, because it lowers your balance and never appears on the profit and loss at all. Money you move into a savings account for taxes does the same thing. Bookkeeping for mental health professionals runs into this pattern constantly, since almost every practice has money in motion at both ends of the month.
Owner draws confuse people more than anything else. What you take out of the practice for yourself is not a business expense. In a sole proprietorship or single-member LLC, a draw pulls cash out of the account and leaves profit exactly where it was. That is why a practice can show a healthy profit and still have a thin balance.
Here is a simple version. Say your practice earns 16,000 dollars in fees for the month and has 7,000 dollars of real operating costs, so profit is 9,000 dollars. In that same month, 12,000 dollars of deposits actually clear, you pay an 1,800 dollar annual premium, you move 2,000 dollars into a tax savings account, and you take a 6,000 dollar draw. The bank barely moved. Nothing is broken. Both numbers are honest.
That is why your reports should show both. Profit tells you whether the practice model is working and whether your fees cover your costs. Cash tells you whether you can cover rent and payday this Friday. Reading them side by side, along with what clients and payers still owe you, is where real clarity comes from. That is exactly what full-service bookkeeping is meant to give you each month, in language you can absorb between sessions. How much to set aside for taxes is a conversation for your tax preparer, and I keep the books ready for them.
If your profit and your balance have never lined up in your head, book a consultation with me and we will walk through your own numbers together.
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More Questions
What's different about bookkeeping for a psychologist who does testing?
Testing behaves like a second business inside the same practice. The engagements run long, the money often arrives on a different schedule than the work, and materials cost real money, so testing revenue and testing costs belong in their own categories.
Read answerI'm leaving agency work to start a private practice. What financial setup do I actually need?
You need less than you think. A business bank account, a QuickBooks file set up for a practice instead of a generic business, a simple monthly rhythm starting your first month, and records your tax preparer will want at year end.
Read answerWhat does my software stack really cost me per month?
Most practices are surprised by the total once every subscription is added up, since EHR tiers, telehealth add-ons, scheduling tools, directory listings, and card processing fees all arrive separately. Coding them to one category in your books gives you a single number you can review and prune once a year.
Read answerHow do I know if my session fee is too low?
Private-pay fees commonly run around $100 to $200, with specialty work higher, but that range is only context. Your real answer comes from what your practice costs, what you need to take home, and how many sessions you can sustain. Clean books make that arithmetic honest.
Read answerWhat kind of practice fits AD Keeps The Books best?
Mental health practices with one to about ten people, anywhere in the country. Solo therapists, psychologists, LCSWs, addiction counselors, psychiatric nurse practitioners, group practices, telehealth practices, and ABA providers. If you want your books current and a bookkeeper who already speaks your language, you're the fit.
Read answerWhat's the difference between catch-up and clean-up bookkeeping?
Catch-up is for books that were never done, meaning months or years with nothing recorded. Clean-up is for books that exist but cannot be trusted because things are miscategorized, unreconciled, or duplicated. Both end the same way, with accurate current books and a monthly rhythm going forward.
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