Bank Accounts

Most educational therapists agree that keeping your business finances separate from your personal or family’s expenses is important.  As a result, accounts for your business could be established in the name of the company.  How many accounts and the types of accounts will vary by person and the bank of choice.  It is important to inquire about bank fees and local offerings. Banking websites often suggest two if not three accounts: business checking account, a money market account, and a savings account. When just starting, it is helpful to at least have a checking and savings account.  With the checking account, ensure you have a bank card and/or credit card to use exclusively for purchases.  Whether you choose to have checks printed will depend on your business needs.  A savings account often provides better interest rates and is a safe place for funds to gather.  Keep in mind banking fees as they can add up and cause unnecessary expenses.  A money market account tends to offer higher interest rates, but there may be additional costs or requirements affiliated with establishing and maintaining a money market account. 

Having a separate business account has the benefit of making tax season easier as your business expenses can be on a different card/account than your personal expenses, and with nearly all banks offering online services, it is easy to track the different types of purchases for further analysis with accounting systems.

Another benefit of keeping your business accounts separate from your personal accounts is that many banks offer the ability to download your bank transactions in formats that can go straight into your accounting system.  This saves time and improves accuracy of the information in your system.

Should I Obtain a Business Credit Card?

Having bank accounts and credit cards assigned to the company makes tracking expenses easier. Once again, be aware of bank fees and charges for having and using the card. Some business owners allow employees to have a business credit card to make purchases, but this is a personal decision and requires a high level of trust.  If employees are permitted to make purchases, guidelines and expectations must be established before allowing these privileges. Solicit the advice of an accountant if this is something that may be appropriate for your business.

How Much Should I Keep in Business Savings?

How much you should set aside in your business savings account will depend on your business and goals.  Most business owners are advised by banks to keep at least 10% of the profits you make every month, with up to 6 months' worth of operating expenses in reserve.  As ET’s schedules will flow with the needs of the clients and often with the academic calendar, a reserve will alleviate concern and allow business owners to manage the natural ebb and flow of business.  It is important to remember that when keeping money in business savings, you should also plan to set aside about 15% of your gross revenue for taxes.

How Much Can I Pay Myself? Employees?

The answer to this will vary based on the business structure you have in place.  As the business owner, you have the responsibility to pay your employees on a consistent basis.  If you choose to also pay yourself, that too must be consistent.  Bimonthly, biweekly, or monthly are common models to pay employees.  How often you choose to pay is often tied in with how often you are charging clients.  It is essential to keep thorough records on all banking transactions.  Banking websites and financial tracking software can be helpful, but it is extremely helpful to work with an accountant regarding payouts to yourself and employees.  You need to understand your local business laws and tax implications to help protect you and your employees.

How Do I Get Paid by My Clients?

The chart below outlines various options on how to get paid.  Each method has positives and negatives.  Once an educational therapist determines what will work best for the practice, it is important to share the process with clients.  Most ETs find that it is best to offer more than one option of payment for clients.  Fees to the educational therapist are involved with some listed choices, which can add up over time. While one can change billing and collection methods, it is better to set a process in place and give it at least a few months to determine its efficacy and ease for client and therapist before making additional changes.

Method	Pro	Con
credit card	Credit cards can be easy for clients who use their credit card for their own expense tracking. The funds are credited immediately. If you accept credit cards, you can also offer the option of electronic payment	There are fees associated with each transaction. Some fees may be deducted as a business expense. Check with an accountant. Clients are required to share card information. Business owners are responsible for holding on to personal credit card information and protecting access to prevent mis-charges.
EBT (Electronic Bank Transfer)	The EBT option may be easy for your clients/payees. The funds are credited immediately. Electronic payment can be set up automatically so the client always pays on time.	EBTs may incur a fee depending on the bank. You need to use billing software for billing to deploy EBT. The client needs to share card information with 3rd party vendors or bank information.
digital wallets (e.g., Venmo, Paypal, Zelle)	The higher security for both payer and payee when money is transferred digitally is beneficial. Fees may be lower than those for credit cards. The client is not sharing personal banking It is generally easier for international clients to pay using digital wallets.	There may be a lag time between the time of the deposit into your account and when you can have access to those funds’ Fees may be associated with the use of the digital wallet. This method requires internet access and accounts set up to receive funds. The Bank accounts must be linked to a digital wallet. There are new laws and regulations coming out about businesses using these for payments and more possible fees.
cash	No additional fees are incurred. The income is immediately available.	Income must be manually inputted and manually recorded. Cash deposits require visiting the bank if you want to make a deposit You must be physically near the client or having the client mail the cash/money order. If cash is issued, you must provide a receipt for cash to the client and document receipt for accounting purposes.  It is easy to forget to do this.
check	No additional fees are incurred. Clients of all ages are aware of how checks work.	Checks must be deposited and require several days before funds are available. ET Must be physically near the client or have the check mailed. Checks may require additional  time to balance a checkbook.

Revenue / Profit / Expenditures

Revenue = money generated from normal business operations (money in)
Expenditures= all spending (money out)
Profit = Revenue - Expenditures

Financial Tracking and Taxes
Regardless of how an ET is paid, it is essential to track all revenue (income) and expenditures (purchases and expenses) carefully.  In the US, all income must be reported to the IRS.  Expenses will help reduce taxable income.  If taxes are not withheld from income, one should anticipate sending estimated taxes quarterly in order to avoid penalties and fines from the IRS.  Check with an accountant who is familiar with your country and state’s tax laws to ensure compliance and timely payments.  It is the business owner’s responsibility to track income and pay all required taxes. 

There are various software programs available to assist with tracking spending and income that can be helpful to monitor the financial aspect of the business.  An accountant will need this information to help guide all tax responsibilities.  Many of these programs are electronic and require a monthly fee. 

An accountant can also assist with retirement planning.  Deposits to retirement accounts can help lower your tax basis.  Retirement accounts are available for small business owners and will vary by business type and state and federal laws.  Seek advice from an accountant on what types of accounts are available and may be a good fit for your business and family needs.

For more information about the accounting needs of your business, see the Accounting Considerations page and the Billing and Receiving page.