A chart of accounts is basically a list of all the financial categories a business uses to keep track of its money.
By having a chart of accounts, you can see exactly where all your money is going and coming from, which is super important for running a successful therapy practice.
Now, creating a chart of accounts might sound a little overwhelming, but don’t worry, it’s easier than you think! We’ll go through the process step by step and make sure it’s tailored specifically for therapy practices.
So, whether you’re a new therapist just starting out or an experienced pro looking to improve your financial tracking, this blog has got you covered.
What is a chart of accounts?
Think of a chart of accounts as a filing system for a company’s financial transactions.
Just like you would organize your paperwork into different categories, a chart of accounts organizes your financial transactions into different categories or tabs.
Let’s look at an example of why a chart of accounts is needed.
Let’s say you spent $100 on printing paper, sticky notes, and pens at Staples yesterday.
In order to keep track of this transaction in your business, you will need to file this transaction into a bucket, or category, in your accounting system.
Which category does it fall under? This is where the Chart of Accounts comes into play. You can refer back to the Chart of Accounts, i.e. your list of categories, to see which bucket the expense would fall under.
In this case, the likely category will be Office Supplies.
Note: What works for other businesses will not necessarily work for your business. That’s why it’s important to create a chart of accounts for your specific business.
Why is the chart of accounts important?
The chart of accounts is important because it provides consistency and accuracy in financial reporting.
Without it, your banking and accounting software will just become a dark hole of various transactions – with no order or organization to them at all.
Additionally, your chart of accounts helps generate financial reports and makes it easier to track and analyze financial trends.
Plus, it ensures compliance with accounting standards and regulations, which is essential for audits and financial reporting.
So, without a chart of accounts, a company’s financial data would be disorganized and difficult to understand.
Where do you use the chart of accounts?
The chart of accounts is used in your bookkeeping or accounting software.
Depending on which software tool you use, the process for uploading your chart of accounts will differ.
For QuickBooks, you can follow these instructions:
- Sign in to QuickBooks Online.
- Select Settings ⚙. Then select Import Data.
- Select Chart of Accounts.
- To upload a file from your computer, select Browse and choose the file. Then select Open.
- Select Next.
- Map your spreadsheet to QuickBooks fields
- Import your chart of accounts
For Xero, you can follow these instructions.
Download your Chart of Accounts for Therapists Template (2023):
As mentioned above, it’s important to tailor your chart of accounts to your specific business.
To make it easy for you, we’ve created a therapy-specific chart of accounts for you to use in 2023.
You can follow the chart of accounts below, or make a copy of our free template here.
|Account Name||Type||Detail type|
|Business Credit Card||Credit Card||Credit Card|
|Owner’s Equity||Equity||Owner’s Equity|
|Owner’s Equity:Federal Estimated Tax Payments||Equity||Owner’s Equity|
|Owner’s Equity:State Estimated Tax Payments||Equity||Owner’s Equity|
|Client Fees||Income||Service/Fee Income|
|Bank Service Charges||Expenses||Bank Charges|
|Business Meals||Expenses||Other Business Expenses|
|Business Permits, Licenses, etc.||Expenses||Tax expense|
|Continuing Education||Expenses||Other Business Expenses|
|Contractors||Expenses||Cost of Labor|
|Digital Services||Expenses||Office/General Administrative Expenses|
|Dues and Subscriptions||Expenses||Dues & subscriptions|
|Interest Paid||Expenses||Interest Paid|
|Legal and Professional Fees||Expenses||Legal & Professional Fees|
|Merchant Fees||Expenses||Bank Charges|
|Office Expenses||Expenses||Office/General Administrative Expenses|
|Reference Materials||Expenses||Office/General Administrative Expenses|
|Rent||Expenses||Rent or Lease of Buildings|
|Repairs and Maintenance||Expenses||Repair & Maintenance|
|Small Equipment (under $2,500)||Expenses||Other Business Expenses|
|Supervision||Expenses||Other Business Expenses|
|Supplies & Materials||Expenses||Supplies & Materials|
|Taxes (sales tax, franchise tax)||Expenses||Tax expense|
|Interest Earned||Other Income||Interest Earned|