Welcome to the podcast, where we explore strategies to help therapists improve their financial well-being. In this episode, we’re joined by author Julie Herres, who shares insights on implementing Profit First, a cash flow management system specifically tailored for therapists. Julie’s warm and empathetic approach makes financial management less daunting for therapists, enabling them to prioritize profit and create a sustainable and thriving practice.
Julie Herres is an expert in Profit First who has helped hundreds of private practice owners gain financial freedom. Founder of GreenOak Accounting, the country’s largest firm serving the mental health industry, Julie is an accountant, consultant, speaker, author of Profit First for Therapists, and host of the Therapy for Your Money podcast.
Changing the Narrative for Therapists
Therapists Can Thrive Financially Julie believes that being a therapist shouldn’t mean a vow of poverty. She aims to dispel the misconception that therapists can’t make a good living while doing meaningful work. “I want to change the narrative that being a therapist should be a vow of poverty because I just don’t think that is true. I think you can go out there and do this amazing work that you were called to do and also make a good living.”
Therapists, typically not known for being warm and fuzzy about finances, find comfort in Julie’s approach. She creates a safe space for therapists to navigate their financial concerns. “I defy that [stereotype]. That’s the work that I enjoy—helping therapists with their finances and providing information for those willing to implement change and improve their practice.”
Understanding Profit First for Therapists
Profit First is a cash flow management system that helps therapists carve out profit intentionally. “By implementing Profit First, you ensure that your business’s profitability is a priority from day one.” Unlike the traditional formula of income minus expenses equals profit, Profit First ensures that profit is a priority. Julie explains the system’s foundation: “We have three bank accounts earmarked for the owner’s benefit—profit, tax, and owner’s pay. Additionally, we have accounts for income, operating expenses, and payroll.”
By allocating funds to specific accounts, therapists can protect their profit and ensure they receive fair compensation for their work. The profit account acts as a reward for taking risks and providing valuable services to the community. “The goal of the profit account is to pay you a dividend once a quarter and reward you for your efforts as a business owner.”
The Power of Smaller Plates for Managing Money
Managing Money Effectively Using a smaller plate analogy, Julie emphasizes the importance of multiple bank accounts in the Profit First system. By dividing funds into separate accounts, therapists gain a clearer understanding of their financial resources. Julie explains, “When you’re able to see what’s available and where your wiggle room is, just within that one smaller account, you’re naturally going to spend less because you’re not looking at one big account that also has money earmarked for other purposes.”
The visual representation of separate accounts prompts therapists to make more informed financial decisions. Dawn Gabriel, the podcast host, shares her own experience: “If you were going to make a decision and you saw this amount in one account versus if it was spread across seven accounts, would you make the same decision?”
Common Mistakes and Solutions when Implementing Profit First
Implementing Profit First To successfully implement Profit First, therapists must be aware of common mistakes that can hinder progress. The first mistake is skipping the creation of separate bank accounts. Julie debunks excuses such as lack of time or familiarity with the banking process. Doing Profit First on paper doesn’t provide the same impact as physically transferring funds between accounts.
Another question arises: Should therapists hide some accounts to avoid constant visibility? While Mike Michalowicz, the author of Profit First, suggests using Vault accounts at different banks, Julie doesn’t recommend this approach for therapists. Instead, she suggests keeping all accounts visible but organizing them strategically for better financial management.
Action Steps and Tips:
- Embrace the belief that being a therapist doesn’t mean accepting a vow of poverty. You can make a good living while helping others.
- Implement Profit First by setting up multiple bank accounts for specific purposes, such as profit, tax, owner’s pay, income, operating expenses, and payroll.
- Allocate funds to each account based on predetermined percentages or amounts.
- Regularly transfer money into the profit account and reward yourself as the business owner by taking a dividend from this account once a quarter.
- Use the visual representation of separate accounts to make more informed financial decisions.
- Avoid common mistakes, such as skipping the creation of separate bank accounts and hiding accounts to avoid visibility.
- Stay organized and track your finances regularly to ensure the system is working effectively.
- Seek support from professionals or resources, such as the book “Profit First” by Mike Michalowicz, to gain a deeper understanding of the Profit First system and its implementation.