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
I'm a good therapist and my books are a disaster. How normal is that?
It is extremely normal. Clinicians spend years training for the work in the room and almost no time learning bookkeeping, so the money side is usually the part that slips. Catch-up work has a clear beginning and a clear end, and it says nothing about your skill as a clinician.
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 answerWhy don't my SimplePractice deposits match my session income?
Your platform pays out after processing fees come off the top, and it batches those payouts on the processor's schedule rather than one per session. That means the bank will never match your session ledger on its own. Good books record the gross revenue and the fees separately so both numbers are real.
Read answerShould my associates be W-2 employees or 1099 contractors?
Classification is not really a preference you get to pick. It turns on how much control the practice has over the associate's work, and associates who see the practice's clients on the practice's schedule often land on the employee side of those tests. The call belongs with employment counsel and your tax professional, and I make sure the books and payroll records match whichever answer is true.
Read answerI offer sliding scale to a good share of my caseload. What should my books show me about it?
Your books should show your effective rate per session, the gap between your posted fee and what you actually collect, and how much of your weekly caseload sits at a reduced rate. Those three numbers tell you what sliding scale really costs and how much of it your practice can carry.
Read answerHow do no-shows and late cancellations show up in my numbers?
Mostly they show up as an absence, which is why they are so easy to miss. Cancellation fees you actually charge should sit in their own income category so you can see what you recovered, and the cost of the empty slots shows up as the gap between what was scheduled and what was earned.
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