But What Even IS Bookkeeping Anyway?
Fun fact: I didn’t exactly know what a bookkeeper was until I looked into becoming one.
I knew I liked my spreadsheets and my budgeting software (I know, I know 🤓), but I was utterly clueless when it came to the financial terms.
Turns out, I wasn’t alone. Most therapists have no clue what bookkeeping involves because nobody teaches us this stuff in grad school.
So, as your friendly neighborhood therapist-bookkeeper, I’m going to break things down for you. Here’s what bookkeeping actually is, in plain English, along with some other common financial terms:
Bookkeeping - It’s basically organizing and tracking all your business money stuff so you actually know what’s happening financially. It’s not just data entry or tax prep - it’s making sure you know where your money comes from, where it goes, and whether you’re actually making money in your business. This information can help you answer questions like:
How much can I pay myself?
Can I afford this training?
Is my business profitable?
“The Books” - Not actual books. Just what we call all your business financial records. When someone says “I need to do the books,” they mean “I need to organize my business money stuff.” Hence the term bookkeeper - we keep your books up to date and ready to go. 🙂
Categorizing - Sorting your business transactions into different categories, also known as accounts. It may help you to think of them as buckets. Every payment you receive gets sorted into “therapy income,” every expense gets labeled as “office rent” or “software subscription,” etc. It not only makes tax prep easier, but can also give you insight into where your money is coming from and where it’s going.
Reconciling - Going through and making sure what actually happened in your bank account matches your records. Like balancing a checkbook, but for your business.
Chart of Accounts - The list of accounts, or categories, that are part of your financial system. It will have your bank and credit card accounts, but also your income and expense categories, among other things.
Accounts Receivable - What we call the money people owe you. If you’ve sent a client a bill or submitted an insurance claim, but haven’t been paid yet, that’s accounts receivable.
Cash Flow - The rhythm of money coming in and going out of your business. Positive cash flow means more money coming in than going out. Negative cash flow means you’ve got more money going out, more expenses, than income coming into your business. Nearly all businesses experience negative cash flow at some point.
The bottom line? If you’ve ever felt confused or intimidated by financial terminology, you’re in good company. Truly.
I’d be curious how this lands for you, and if any other terms come to mind that would be helpful for me to add. Shoot me an email - I read every message and I’d love to hear your thoughts!
Want to see what bookkeeping support actually looks like for therapy practices? Check out my services guide at littlefrogfinancial.com/guide.