Bookkeeping and payroll for mental health professionals in private practice

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I've been running my practice through my personal checking account. How do I untangle it?

First, take a breath. This is the single most common thing practice owners tell me, usually in a slightly apologetic voice, and it is fixable. Most practices start small. A few clients on the side of a full-time job, one payment app, and the personal account was simply what was there. Nobody sits down and decides to mix everything together. It just grows that way.

The fix has two halves. The first is going forward, and that part is easier than people expect. Open a business checking account and get a business debit or credit card. Then move every practice dollar through it. Your EHR or practice management payouts, your merchant processor deposits, office rent or your share of a suite, your EHR and telehealth subscriptions, liability insurance, license renewals, continuing education, supplies. Once money comes in and goes out of one account, the books largely keep themselves.

Pay yourself on purpose too. When you need money personally, transfer it from the business account to your personal one. That transfer gets recorded as an owner draw, or as a paycheck if you are on payroll, and it keeps the line between you and the practice easy to see.

The second half is the history, and that is really just patient sorting. Pick a start date, usually the beginning of the year you want cleaned up or the month the practice actually began. Then work through the personal statements for that stretch and pull out what belongs to the practice, every client payment received and every practice expense paid. Those expenses still count even though personal money covered them. In the books they get recorded as business expenses funded by owner contributions. I never connect a personal account to QuickBooks and import all of it, because then grocery runs and car payments end up living in the practice’s records forever. I record only the practice activity. That is exactly what clean-up bookkeeping is for.

It matters for three practical reasons. The practice ends up with records that stand on their own. Tax time stops being a scavenger hunt, because your tax preparer can work from a real profit and loss instead of rebuilding a year from a mixed statement, and questions about what you owe and how to plan stay with that professional where they belong. And most owners see the honest economics of their practice for the first time, which changes how they think about fees, caseload, and hours. Bookkeeping for therapists and other mental health practices is what I do all day, so none of this surprises me.

If your practice is an LLC or a corporation, separation carries extra weight, and your tax preparer or attorney can tell you what your particular setup expects.

If you want help sorting the mix and setting things up so it never happens again, book a consultation with me and we will look at it together.

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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

What does tax-ready books mean if you don't do taxes?

Tax-ready means the books are complete, categorized, reconciled, and documented before your tax preparer ever opens the file. I keep the records right all year so your preparer does the tax work quickly and with very few questions.

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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.

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How do quarterly estimated taxes fit into my bookkeeping?

Your tax preparer calculates the amounts. Your books supply the current profit number those calculations depend on, and they keep the record of what you paid and when. When the books are months behind, every estimate turns into a guess.

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What should I look at in my reports each month if I only have ten minutes?

Look at four things. Revenue compared to last month and the same month last year, the few expense lines that actually move, profit for the month, and cash on hand. That is enough to know whether the practice is healthy, and anything that looks strange can be a quick conversation.

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What does monthly bookkeeping actually do for a private practice?

Monthly bookkeeping keeps your books current, keeps your financials tax-ready, and gives you a clear view of how the practice is doing. Each month transactions get categorized, accounts get reconciled to the bank, and you get a short set of reports you can read between sessions.

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AD Keeps The Books is Aretha Dirde, 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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