Demystifying the Financial Complexities of Private Practice with Heard

In my most recent episode of The Private Practice Pro Podcast, I speak with Andrew Riesen, the CEO of Heard, a financial back-office for therapists breaking out on their own. If you are feeling overwhelmed by the financial aspects of starting your own private practice, this episode is for you. Andrew’s experience as a financial accountant, mission-driven entrepreneur and co-founder of a sales tax solution for small to medium-sized businesses makes him a valuable source of knowledge in this area.

In this episode, we walk through topics such as the value of speaking with a professional, the different types of business entities and how to determine yours, how to separate your personal finances from your business finances, paying yourself, planning for time off, and operating in multiple states – you know – all the “scary stuff” – so you can feel confident starting a private practice.

Heard combines smart software with real humans to manage bookkeeping, taxes and payroll for therapists. On average, they save therapists 60 hours per year in financial record-keeping and $5,400 per year in taxes. While Andrew covers specifics about Heard’s services, he also shares a wealth of practical tips and guidance to help you navigate the financial complexities of starting your own private practice.

Don’t let financial worries hold you back any longer. Tune into this upcoming episode and let us demystify the financial aspects of starting a business for you so you can focus on what you do best – helping your clients.

Demystifying the Financial Side of Private Practice: A Guide for Therapists

Starting a private therapy practice is an exciting and empowering journey, but it comes with financial responsibilities that many therapists feel unprepared for. From selecting the right business entity to navigating taxes and payroll, therapists often face complex questions with few clear answers. Fortunately, support systems like Heard are helping to simplify the process.

Whether you’re just beginning to start your private practice or looking to optimize a solo therapy practice, this guide breaks down key financial concepts to help you grow with confidence.

Why Financial Literacy Matters for Therapists

Therapists are highly trained in mental health, but most graduate programs don't cover how to run a business. As more professionals shift into private practice, this gap in education becomes evident. Therapists suddenly find themselves asking, “Do I need an LLC? How do I pay myself? How much should I save for taxes?”

Without the right tools or guidance, therapists may end up overspending, under-saving, or getting overwhelmed. That’s where platforms like Heard step in, offering private practice tools for therapists to help manage finances, payroll, and taxes, so you can focus on client care.

Choosing the Right Business Entity

One of the first decisions when starting a private therapy practice is choosing the proper business structure. The most common types include:

• Sole Proprietor: This is the default if you start practicing without formally registering your business. It’s simple, but leaves no legal separation between personal and business assets.

• LLC or PLLC: This structure helps separate your business from personal finances and is recognized by most states for licensed clinicians.

• S Corp: For more established practices, this can help reduce your tax burden by separating wages and distributions.

Talk to a CPA or legal advisor before making any decisions. Internet advice may be misleading, and business formation rules vary by state. A good guide for therapists will help you make the best choice for your circumstances.

Opening Business Bank Accounts

After forming your business entity, open a dedicated business checking and savings account. This keeps your therapy practice finances organized and ready for quarterly and annual tax filings. For cash-pay therapy practices, it also helps track income and plan for sliding scale therapy fees, if applicable.

Pro tip: Use your business checking account for all income and expenses, and deposit a percentage of each payment into your savings account for taxes. Even if you’re just billing clients through SimplePractice or TherapyNotes, separating your funds makes it easier to track and report.

Planning for Taxes the Smart Way

One of the biggest challenges in a cash-pay therapy practice is understanding how much to save for taxes. Too often, therapists either spend all their income or stash it away without knowing how much they’ll actually owe. Blanket advice like “save 30%” isn’t always accurate.

Tax planning should be tailored to your individual situation, especially if you also have W-2 income, real estate, or a partner’s income to consider. A platform like Heard helps therapists determine realistic savings goals based on actual income, effective tax rate, and expenses.

Important reminder: Paying quarterly estimated taxes is often required and failing to do so can result in costly penalties.

Paying Yourself: Owner's Draws and Payroll

After taxes and expenses, how do you pay yourself?

• For sole proprietors, therapists typically take what’s called an owner’s draw. After setting aside money for taxes and business expenses, you can transfer the remaining funds to your personal account.

• For S Corps, you’ll need to run payroll and pay yourself a reasonable W-2 salary. After that, you can take distributions (which aren’t subject to self-employment tax).

Heard’s allocation guide helps therapists understand how much they can safely withdraw, save for taxes, and invest in benefits like retirement or maternity leave. These types of tools for therapists simplify financial planning and prevent costly mistakes.

Planning for Paid Time Off and Maternity Leave

One concern that comes up often, especially in women-led practices, is how to prepare financially for maternity leave or time off. Unlike salaried jobs, therapists in private practice need to proactively plan to ensure they can still cover expenses.

Using financial software designed for therapists, such as Heard, you can set monthly savings goals to cover time off. Whether you're a parent planning leave or just want a break, these therapist-approved strategies help maintain a steady income without stress.

Navigating Multi-State Practice

With teletherapy expanding across state lines, many therapists now operate in multiple states. This creates tax complexities that vary depending on where your clients are located and where your business is based.

Every state has its own tax laws, and multi-state practices should work with professionals to ensure compliance. It’s one of the trickiest parts of scaling a group therapy practice or online private practice, and not something to DIY based on Google searches.

Integration with Therapy Platforms

Many therapists use billing platforms like SimplePractice or TherapyNotes. Heard compliments these tools by managing what those platforms don’t, bookkeeping, tax filing, and payroll.

Most therapy software operates on accrual accounting, but tax professionals often recommend cash basis accounting for private practice therapists. Heard helps you reconcile these differences and provides accurate reports for your tax filings.

Whether you run an out-of-network therapy practice or accept private pay only, having accurate records is essential.

Building a Scalable and Sustainable Practice

Financial management is not just about compliance; it’s about growing your private practice. When your books are in order, you can plan to:

• Hire additional clinicians

• Expand to group therapy practice

• Launch online marketing for therapists

• Explore out-of-network therapy billing

• Implement marketing ideas for therapists

You can’t scale what you can’t measure. That’s why financial clarity is a key step in any roadmap to success in private practice.

Marketing and Monetizing with Confidence

Once your finances are under control, you can shift focus to marketing for therapists and growing your therapy practice. Knowing how much you need to earn monthly to pay yourself and cover costs helps you price your services correctly, plan for therapy office overhead, and invest in marketing therapy private practice strategies that work.

Using tools like Heard in combination with a strong marketing guide for therapists gives you the confidence to set realistic goals and attract ideal clients. This is especially important in a private pay therapy model, where every session directly impacts your bottom line.

Final Thoughts

Private practice therapists deserve the same business support and financial strategy as any entrepreneur. With the right systems and support in place, you can go from feeling overwhelmed to confidently managing every aspect of your therapy business.

Whether you're working solo or building a private practice with a team, the key is to use therapist-approved tools, get reliable professional advice, and keep learning as your practice evolves.

If you're feeling stuck, Heard offers a free consultation to help you determine the next best steps in your financial journey. You don’t have to do this alone, and when it comes to managing money, getting help early makes all the difference.