You’re spending hours trying to navigate the complex process of billing insurance companies, leading to delays in receiving payments and causing cash flow issues. Additionally, managing client payments can be challenging, especially when some clients have difficulty paying for services. On top of that, tracking and managing expenses for your clinic can be a daunting task, with various costs to keep track of and budgets to manage.
With our accounting services for psychologists, we can simplify these processes for you. We help with managing client payments, and provide tools and insights for tracking and managing expenses. This allows you to focus on providing quality care to your clients, leading to a more efficient and sustainable clinic operation.
Mental Health Practitioners Benchmarking Data
This is the Financial Performance Data for offices of mental health practitioners (except physicians). The data is gathered from the Statistics Canada.
Using data to compare your clinic’s financial performance with the average financial performance of similar practices in Canada can help you see how well your clinic is doing financially compared to others. This comparison can show you where your clinic is doing well and where there may be room for improvement. By looking at this information, you can make smarter financial decisions, set realistic goals, and work towards improving your clinic’s financial success based on industry standards.
Revenue range: Annual revenues $30,000 – $5,000,000
Provinces / Territory / Canada: Canada
Incorporation status: Incorporated businesses
Distribution by: Total revenue
Value in: Dollars
Data year: 2022
| Whole industry (reliability) |
Bottom quartile (25%) |
Lower middle (25%) |
Upper middle (25%) |
Top quartile (25%) | Percentage of businesses reporting | |
|---|---|---|---|---|---|---|
| Number of businesses | 11,287 | |||||
| Revenue range: | ||||||
| Low Value ($000) | 30 | 30 | 54 | 86 | 146 | |
| High Value ($000) | 5,000 | 54 | 86 | 146 | 5,000 | |
| Revenues and expenses | (thousands of dollars)— Averages | |||||
| Total revenue | 158.6B | 41.4 | 68.9 | 110.7 | 413.5 | 100.0 |
| Sales of goods and services | N/A | N/A | N/A | N/A | N/A | N/A |
| All other revenues | N/A | N/A | N/A | N/A | N/A | N/A |
| Cost of sales (direct expenses) | 8.5C | 0.2 | 0.4 | 1.1 | 32.3 | 6.9 |
| Wages and benefits | 2.2C | 0.0 | 0.1 | 0.2 | 8.5 | 1.4 |
| Purchases, materials and sub-contracts | 6.2C | 0.2 | 0.3 | 0.8 | 23.6 | 6.6 |
| Opening inventory | 0.0A | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 |
| Closing inventory | 0.0A | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 |
| Operating expenses (indirect expenses) | 65.8C | 12.8 | 19.9 | 31.0 | 199.5 | 98.4 |
| Labour and commissions | 28.1C | 0.9 | 1.9 | 5.9 | 103.6 | 23.2 |
| Amortization and depletion | 1.8C | 0.5 | 0.7 | 1.0 | 4.9 | 64.6 |
| Repairs and maintenance | 0.6C | 0.1 | 0.2 | 0.3 | 1.6 | 20.1 |
| Utilities and telephone/telecommunication | 2.0C | 0.9 | 1.1 | 1.5 | 4.4 | 79.1 |
| Rent | 9.8C | 3.5 | 5.2 | 8.3 | 22.4 | 71.5 |
| Interest and bank charges | 0.5E | 0.1 | 0.2 | 0.3 | 1.6 | 27.3 |
| Professional and business fees | 5.8E | 1.0 | 2.4 | 2.5 | 17.5 | 84.2 |
| Advertising and promotion | 2.1E | 0.4 | 0.6 | 0.9 | 6.5 | 60.7 |
| Delivery, shipping and warehouse expenses | 0.0E | 0.0 | 0.0 | 0.0 | 0.1 | 8.2 |
| Insurance | 1.3C | 0.4 | 0.5 | 0.7 | 3.4 | 82.1 |
| Other expenses | 13.8C | 5.1 | 7.2 | 9.6 | 33.4 | 97.8 |
| Total expenses | 74.3C | 13.0 | 20.3 | 32.1 | 231.7 | 98.4 |
| Net profit/loss | 84.4B | 28.4 | 48.6 | 78.7 | 181.8 | 100.0 |
| Balance sheet | (thousands of dollars)— Averages | |||||
| Total assets | N/A | N/A | N/A | N/A | N/A | |
| Total current assets | N/A | N/A | N/A | N/A | N/A | |
| Accounts receivable | N/A | N/A | N/A | N/A | N/A | |
| Closing inventory | N/A | N/A | N/A | N/A | N/A | |
| Other current assets | N/A | N/A | N/A | N/A | N/A | |
| Net tangible and intangible assets | N/A | N/A | N/A | N/A | N/A | |
| All other assets and adjustments | N/A | N/A | N/A | N/A | N/A | |
| Total liabilities | N/A | N/A | N/A | N/A | N/A | |
| Total current liabilities | N/A | N/A | N/A | N/A | N/A | |
| Current bank loans | N/A | N/A | N/A | N/A | N/A | |
| Other current liabilities | N/A | N/A | N/A | N/A | N/A | |
| Long term liabilities | N/A | N/A | N/A | N/A | N/A | |
| Total equity | N/A | N/A | N/A | N/A | N/A | |
| Financial ratios | Averages | |||||
| Current ratio | N/A | N/A | N/A | N/A | N/A | |
| Debt to equity ratio | N/A | N/A | N/A | N/A | N/A | |
| Interest coverage ratio | 158.9 | 288.3 | 296.9 | 271.1 | 115.8 | |
| Debt ratio | N/A | N/A | N/A | N/A | N/A | |
| Revenue to equity ratio | N/A | N/A | N/A | N/A | N/A | |
| Revenue to closing inventory ratio | N/A | N/A | N/A | N/A | N/A | |
| Current debt to equity (%) | N/A | N/A | N/A | N/A | N/A | |
| Net profit to equity (%) | N/A | N/A | N/A | N/A | N/A | |
| Net fixed assets to equity (%) | N/A | N/A | N/A | N/A | N/A | |
| Gross margin (%) | 94.7 | 99.5 | 99.5 | 99.1 | 92.2 | |
| Return on total assets (%) | N/A | N/A | N/A | N/A | N/A | |
| Collection period for accounts receivable (days) | N/A | N/A | N/A | N/A | N/A | |
| Profitable vs Non-profitable businesses | (thousands of dollars) | |||||
| Profitable | ||||||
| Percentage of businesses (%) | 96.4 | N/A | N/A | N/A | N/A | |
| Total revenue | 152.4B | 41.4 | 68.8 | 110.6 | 401.1 | |
| Total expenses | 61.9C | 11.5 | 17.2 | 29.1 | 196.5 | |
| Net profit | 90.5B | 29.9 | 51.6 | 81.5 | 204.7 | |
| Non-Profitable | ||||||
| Percentage of businesses (%) | 3.6 | N/A | N/A | N/A | N/A | |
| Total revenue | 326.1E | 40.7 | 70.7 | 114.3 | 574.8 | |
| Total expenses | 405.8E | 72.5 | 174.5 | 130.6 | 689.4 | |
| Net loss | -79.7E | -31.8 | -103.8 | -16.2 | -114.6 | |
Source: Statistics Canada – Small business profiles, 2022
Legend for: Quality indicators
- A = Excellent
- B = Very Good
- C = Good
- D = Acceptable
- E = Use with caution
Accounting Challenges of Psychologists
Billing and insurance reimbursement
Psychologists sometimes face challenges in accurately billing insurance companies, which can lead to delays in payments and financial issues for the clinic. This may make it difficult for you to cover your expenses and provide consistent care to your clients. It’s important to get this right so you can keep your clinic running smoothly and maintain a good reputation with insurance providers, helping you attract more clients and keep your business thriving.
Balancing clinical and business responsibilities
Psychologists are often left to do various administrative tasks such as scheduling appointments, managing billing and insurance claims, maintaining records, and overseeing staff, all while providing quality mental health services to clients. When psychologists have to wear many hats, it can lead to time constraints, increased stress, and potential burnout, impacting their ability to deliver optimal care to clients. If this struggle persists, psychologists may experience reduced job satisfaction, compromised quality of care, and challenges in effectively managing the overall operations of the clinic.
Lack real-time information to support practice growth decisions
This challenge arises when psychological clinics do not have access to up-to-date data and analytics to make informed decisions about expanding their practice. Without real-time information on key performance indicators such as client demographics, service utilization, revenue streams, and marketing effectiveness, clinics may struggle to identify growth opportunities, allocate resources effectively, or adapt to changing market demands.
This weakness in data-driven decision-making can hinder the clinic’s ability to capitalize on emerging trends, optimize service offerings, or implement strategic initiatives for practice growth. In the absence of real-time insights, clinics may miss out on potential revenue enhancements, operational efficiencies, and competitive advantages, limiting their capacity to evolve and thrive in a dynamic healthcare landscape.
Ethical and compassionate billing practice
It’s understandable that some clients may find it hard to pay for services, for various reasons. In these situations, you may need to be flexible by offering payment plans, reduced fees, or sliding scale fees. Sliding scale fees is a compassionate flexible approach that allows clients to pay based on their income level or financial circumstances, ensuring that they can still access necessary mental health services without facing financial hardship. While this is your way of prioritizing your clients’ needs, it can make your accounting process more complex and add extra work for you. If these payment challenges persist, they could impact your clinic’s finances and limit your ability to invest in improving services for your clients.
Tax compliance anxiety and limited financial expertise
This challenge can manifest as concerns about accurately filing taxes, adhering to financial regulations, and managing financial records effectively. Without the necessary financial knowledge or support, psychologists may struggle to navigate tax-related responsibilities, maintain compliance with regulations, and make informed financial decisions for the clinic.
If this anxiety around taxes and financial compliance persists, it can result in potential tax penalties, financial mismanagement, and compliance issues that could harm the clinic’s financial stability and reputation. Additionally, the lack of financial expertise may hinder the clinic’s ability to assess its financial health, plan for growth, and optimize financial strategies to support its operations and sustainability.
Common Client Questions
What are the considerations for setting up a fee structure that is fair and sustainable for both clients and the clinic?
When setting up a fee structure for mental health services, it’s important to consider factors such as the cost of providing services, market rates, and the financial needs of your clinic. Offering a range of fee options, such as standard rates, sliding scale fees based on income, or discounted packages, can make services more accessible to clients while ensuring the clinic’s financial sustainability.
Alternatively, you may opt to take owner’s draws or distributions from your business profits, especially if you are operating as a sole proprietorship. It’s essential to work closely with your accountant to assess your financial situation, tax obligations, and long-term financial objectives to determine the most suitable method of paying yourself that aligns with your business and personal financial goals.
As a solo practitioner, how should I pay myself?
Determining how to pay yourself involves considering various factors such as your business structure, financial goals, and tax implications. One common approach for solo practitioners is to set up a regular salary for yourself, similar to how an employee would be paid. This can help you establish a consistent income stream and manage your personal finances effectively.
Should I incorporate as a solo practicing psychologist?
When thinking about setting up your solo psychology practice as a corporation in Canada, consider the tax advantages, protection from financial risks, and professional image that incorporation can provide. However, keep in mind that incorporating involves extra paperwork, costs, and rules to follow. It’s a good idea to talk to a legal or financial expert who knows about Canadian business laws to help you decide if incorporating is the right choice for your practice.
How can I cut the amount of time I spend on bookkeeping and accounting for my clinic?
To cut the amount of time spent on bookkeeping and accounting for your clinic, consider streamlining financial processes with accounting software, outsourcing accounting services to professionals, setting up regular financial reviews, simplifying record-keeping systems, and investing in training for yourself or your staff. By implementing these strategies, you can streamline your financial management processes, save time on routine accounting tasks, and focus more on providing quality care to your patients and running your clinic effectively.
Do I have to pay taxes in other provinces and territories if I see clients via telehealth
In Canada, the tax rules are based on the concept of “permanent establishment,” which refers to having a significant presence or business activity in a particular province or territory. If you provide services to clients located in provinces or territories where you do not have a physical presence or permanent establishment, you may not be required to pay taxes in those jurisdictions.
However, it is essential to consider the specific tax laws, regulations, and guidelines of each province or territory, as well as seek guidance from a tax professional or accounting services for psychologists familiar with interprovincial tax implications to ensure compliance with applicable tax requirements.
