How to Start a Physical Therapy Practice: PT Financial System

First off, this is a series based on our guide HOW TO START A PHYSICAL THERAPY CLINIC SIDE HUSTLE - THE ULTIMATE GUIDE. You can check it out to learn about all of the aspects of starting a physical therapy clinic side hustle!

Are you a physical therapist looking to leverage your skill set in a way that creates time and financial freedom for you and your family? If so, you're in the right place. My name is Danny Matta, and over the last 15 years, I've done pretty much everything you can in the profession. I've been a staff PT, an active duty military officer physical therapist, started my own cash practice, sold that practice, and now, through my company, Physical Therapy Business, I've helped over a thousand clinicians start, grow, and scale their own cash practices.

Starting a physical therapy practice, particularly a cash-based one, can be incredibly rewarding but also challenging, especially when it comes to financial management. In this guide, I'll share some essential strategies to help you manage your practice's finances effectively and ensure your business's success.

Understanding Your Financial Basics

When I first started my practice, my approach to tracking finances was rudimentary at best. I'd compare my bank account balance on the same date each month and use that as a measure of success. This method, while simple, is fraught with inaccuracies and can lead to financial mismanagement. Instead, adopting a structured and regular approach to financial management is crucial.

Set Up Regular Financial Meetings

One of the most beneficial habits you can develop is to have regular financial meetings with yourself. At a minimum, have a monthly financial review, but consider weekly check-ins as well. During these meetings, review your expenses, income, and upcoming financial obligations. This practice not only helps you stay on top of your finances but also provides a clearer picture of your business's financial health.

Simplifying Your Financial Accounts

A simplified financial structure can make managing your practice much easier. Here's a streamlined approach:

1. Business Account: This is your central account where all income is deposited. Aim to keep at least three months' worth of operating expenses in this account as a cash reserve.
2. Tax Account: Set aside 20% of your gross revenue into this account monthly. This ensures you have the funds to cover your quarterly tax payments and avoid any year-end surprises.
3. Profit Account: Allocate 5-10% of your revenue to this account. This helps you build a reserve that can be used for bonuses, reinvestments, or personal distributions.
4. Personal Account: Pay yourself a consistent salary from your business account to your personal account. This helps maintain personal financial stability and separates your personal and business finances.

Managing Business Expenses

Put as many of your expenses on a business credit card as possible. This consolidates your spending in one place, making it easier to track and manage. Pay off the card weekly to avoid accumulating debt and to regularly review your expenses.

Forecast and Reflect

During your weekly financial meetings, also look ahead to forecast your business's financial needs for the upcoming week. On a monthly basis, reflect on the previous month's performance. This practice helps you stay proactive and prepared for any financial fluctuations.

Use Financial Tools

Consider using financial tools like Monarch to track and categorize your expenses. These tools can automate much of the process, providing detailed insights into your spending habits and helping you manage your personal and business finances more effectively.

The Profit First Method

Many successful entrepreneurs use the Profit First method by Mike Michalowicz. While the full method can be complex, its core principle is simple: prioritize profitability by allocating your revenue into different accounts. Even adopting a simplified version of this method can significantly improve your financial management.

Handling Payroll

If managing payroll becomes cumbersome, consider using a payroll service like Gusto. These services can handle tax withholdings and salary distributions, ensuring compliance and simplifying your financial processes.

Communication and Accountability

If you have a business partner or a spouse involved in your finances, ensure open communication and regular check-ins. Holding each other accountable and staying informed about your financial status can prevent misunderstandings and financial missteps.

Avoiding Financial Avoidance

It's common for business owners to feel stressed about finances, leading to avoidance. However, facing your financial situation head-on and maintaining clarity about your income and expenses is crucial for long-term success. Avoidance only exacerbates problems, while proactive management can provide peace of mind and financial stability.

Conclusion

Starting and running a successful physical therapy practice requires more than clinical skills; it demands sound financial management. By setting up regular financial reviews, simplifying your account structure, using financial tools, and maintaining open communication, you can navigate the financial complexities of your practice and achieve both professional and personal financial goals.

Remember, the key to success is consistency and proactive management. Start implementing these strategies today and watch your physical therapy practice thrive. For more info on this topic check out this podcast from Danny!

Ready to elevate your practice? Book a call at the link below with one of our expert consultants today and start your journey to delivering unparalleled physical therapy.