Welcome to this special blog post tailored specifically for chiropractors! Whether you're a chiropractor, a spouse, or a partner helping to run a practice, there's valuable advice here that can benefit your business. Over the past three years of running my bookkeeping business, I've niched with chiropractors and noticed some common financial situations they face. I want to share my insights and tips to help you navigate these challenges.

Purchasing Equipment: Managing Debt Wisely

One of the first things we'll discuss is purchasing equipment. It's crucial to strike a balance between investing in necessary equipment and managing debt. While I encourage saving up and paying cash for equipment, I understand that sometimes taking on debt is unavoidable. Here are some guidelines to help you manage equipment debt effectively:

Limit Debt: Aim to have debt that is no more than 15% of your annual projected revenue. For instance, if your annual revenue is $200,000, your equipment debt should not exceed $30,000.

Monthly Payments: Keep your monthly payments to no more than 5% of your revenue. In the example of a $200,000 annual revenue, this means payments should be around $833 per month. This would lead to debt payoff in 3 years.

Paying Yourself: Setting a Reasonable Salary

A common question among chiropractors is how much to pay yourself. If your practice is structured as an S corporation, you need to pay yourself a reasonable salary as a W2 employee. Based on my experience with bookkeeping for chiropractors, typical salaries range between $60,000 and $80,000 annually. However, it's essential to consult with your tax professional to determine a reasonable salary for your specific situation.

Savings Goals for Reinvestment

Planning for future expenses and reinvestment in your practice is crucial. Whether it's for new equipment, continuing education, or attending conferences, having a savings plan can help you avoid unnecessary debt. Here are some steps to set up a savings plan:

Assess Equipment Needs: Regularly evaluate your equipment to anticipate replacement needs and save accordingly.

Create Sinking Funds: Allocate a portion of your net profits each month into a fund designated for upcoming expenses, such as conferences or educational seminars. You can also do this for annual or quarterly bills.

DIY Bookkeeping: Common Mistakes to Avoid

Many chiropractors handle their own bookkeeping or delegate it to a spouse or office manager. While this can work well if done correctly, I've noticed several common mistakes that can lead to financial inaccuracies:

Improper Loan Breakdown: Ensure loan payments are correctly categorized, separating the principal and interest.

Payroll Mismanagement: Use payroll processing software to map accounts accurately, ensuring proper categorization of payroll expenses and liabilities. Do not just categorize the withdrawals from your bank account as an expense. This is not accurate as part of those debits are for tax liability withholding and do not reflect the total wages paid to employees.

Incorrect Bonus Payments: Run employee bonuses through payroll to ensure proper tax reporting.

High Expense Categories: Focus Areas

Three expense categories often stand out for chiropractors: advertising and marketing, continuing education, and payroll. Here's how to manage these effectively:

Advertising and Marketing: Regularly evaluate the ROI on advertising efforts, ensuring that they contribute to attracting new patients.

Continuing Education: Plan and budget for continuing education costs, using sinking funds to save for these expenses. Factor the travel into your budget for attending live conferences and seminars.

Payroll: Aim to keep payroll costs under 50% of your revenue. Evaluate staffing needs to ensure your practice is not overstaffed.

Maximizing Deductions: Don't Miss Out

Chiropractors and other business owners often miss out on significant deductions, including:

Mileage: Track mileage for business-related travel using tools like the QuickBooks Online app if you have it.

Home Office: Deduct a portion of your home office expenses based on the square footage used for business. Make sure you communicate with your tax pro about this before or during tax season.

Donations: Classify sponsorships that offer advertising benefits as marketing expenses rather than charitable contributions.

Travel: Pay for business travel expenses from business accounts to ensure proper deductions, then take the travel card rewards and use them personally if you wish.

Personal Funds for Business Expenses: Document any personal funds used for business expenses to ensure they are accounted for as contributions.

By following these tips, you can ensure better financial management for your chiropractic practice. If you have any financial questions you’d like answered, feel free to reach out at [email protected]. I’ll be doing Q&A podcast episodes in the future, and I’d love to address your questions. Don't forget to check out my freebies, including a sample chiropractor profit and loss statement, available at financiallyadjusted.com under the ’Free Resources’ tab.

Stop back for more financial insights and tips to help you run a successful chiropractic practice and listen to the podcast below!

Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.