Bookkeeping and payroll for mental health professionals in private practice

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What's different about bookkeeping for a psychologist who does testing?

Testing behaves like a different business than therapy, even though it happens under the same license and often in the same office. That is the short version, and it is the reason a mixed practice needs books that keep the two apart.

Start with revenue. Assessment income gets its own account, therapy income gets its own, and consulting or evaluation work gets its own if you do any. When those sit in one bucket called “income,” your profit and loss tells you almost nothing about which part of your week is carrying the practice. Split out, the monthly report answers the question you actually have. That separation is the first thing I set up when I do bookkeeping for psychologists.

Then there is timing. A battery starts with an intake, moves to one or two long administration days, then scoring, then report writing, then a feedback session. Weeks pass between the first appointment and the finished report. Payment might come as a deposit up front with the balance at feedback, or as one payment at the end. So the month the cash lands and the month the work happened often do not match. Once you know that rhythm, a quiet-looking month stops feeling alarming, and you can see what is really going on.

Materials deserve their own expense category too. Protocols and record forms get consumed with every administration. Scoring platforms charge per report or by subscription. Kits and instruments are larger purchases that come back around when editions update. When all of that hides inside office supplies, you cannot see what it costs to deliver a battery before your own time is counted. How the bigger instrument purchases get handled on your return is a conversation for your tax preparer, and I keep the records clean so that conversation is easy.

If a psychometrist or a testing assistant helps you, their payments need tracking all year so January is simple, whether they are on payroll or paid as a contractor.

The payoff is knowing your effective hourly rate on testing with report hours included. A flat battery fee can look strong until scoring and writing time joins the math. Bookkeeping for mental health professionals is what I do all day, and this kind of clarity is what lets psychologists set fees, decide how many assessments to take in a month, and choose whether testing or therapy hours get the next open slot.

Assessment practices also tend to carry real receivables, since families, schools, and referring attorneys often pay directly rather than by card on file. Someone needs to know who still owes what.

If your books are lumping testing and therapy together, I would be glad to look at them with you. Book a consultation and we will talk it through.

Helping the People Who Help Others

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Tell me where your books stand right now, even if the honest answer is that nobody has looked at them in a year. I'll ask a few questions and give you a clear idea of how I can help.

More Questions

I'm embarrassed to show anyone my books. What will you think of me?

I think it took something to ask. Close to half the people who contact me open with an apology, so you are in good company. The state of your books tells me what work needs doing, and nothing at all about who you are.

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How should insurance payments show up in my books if you don't do billing?

I don't do insurance billing, claims, ERA posting, or credentialing. That work stays in your practice management system or with your biller. What bookkeeping does is reconcile what that process produces, matching every payer deposit that reaches your bank against what your records say you were paid.

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What's the difference between profit and the cash in my account?

Profit measures what your practice earned and spent over a period of time. Your bank balance shows what is sitting there at one moment, after payment lags, big annual bills, tax set-asides, and owner draws. Both numbers are true, and they answer different questions.

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How do refunds and client credits get handled properly?

A refund reduces revenue in the period you give it back, and prepaid sessions sit as a liability until the session actually happens. Client credit balances need to be tracked by name so nobody's money quietly disappears into the books.

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Where do my payment processing fees actually go in my books?

Processing fees belong in their own expense account, with your session revenue recorded at the full amount clients paid. If you only record the smaller net deposit that lands in your bank, both your revenue and your fees disappear from view.

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What is a healthy overhead percentage for a practice?

Common guidance puts overhead under roughly 32 percent of revenue for a lean solo practice, with group practices running higher. Treat that as a starting reference to verify, since the number that actually helps you is your own, tracked month after month.

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AD Keeps The Books is Aretha Dirden, a bookkeeper who spent more than 15 years as a licensed nurse in mental health before taking over the books for the people doing that work. She handles monthly bookkeeping, catch-up and clean-up work, and payroll for therapists, psychologists, counselors, and clinical social workers in private practice, and she does the work herself for every client. Based in Lancaster, California, serving practices nationwide. QuickBooks ProAdvisor certified.

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