How to Do Accounting for a Small Animal Practice Without an Accountant
Learn to manage your small animal practice's accounting yourself with practical steps, software options, and cost-saving tips. No accountant needed.
Running a small animal practice means wearing many hats, and accounting is one you might not have trained for. But with the right tools and a clear process, you can handle your own books accurately and keep your practice financially healthy. This guide walks you through the essential steps, from setting up your system to staying on top of taxes, all without hiring a full-time accountant.
Set Up Your Accounting System
The first step is choosing an accounting method and software that fits your practice. Most small practices use cash basis accounting, where you record income when you receive it and expenses when you pay them. This is simpler and matches your bank account activity. Accrual basis, which records transactions when they occur, is more accurate but complex. For most small animal practices, cash basis is sufficient.
Next, pick accounting software. Options include QuickBooks Online ($30-$80/month), Xero ($13-$65/month), Wave (free, with paid add-ons), and FreshBooks ($19-$55/month). For a small practice, QuickBooks Online or Xero are popular because they integrate with payment processors and payroll services. Wave is a good free option if you’re just starting out, but it lacks some advanced features.
Set up your chart of accounts: categories like revenue, cost of goods sold (COGS), payroll, rent, utilities, supplies, and equipment. Keep it simple but specific enough to track your key expenses.
Track Income and Expenses
Your income comes from client payments, which may include cash, credit cards, and pet insurance reimbursements. Record every transaction promptly. Use your software to connect your bank and credit card accounts, which automatically imports transactions and categorizes them. Review and reconcile these transactions at least weekly to catch errors early.
For expenses, categorize everything: medical supplies, pharmaceuticals, lab fees, equipment, rent, utilities, payroll, marketing, and insurance. Separate your personal and business expenses by using a dedicated business bank account and credit card. This makes tracking cleaner and simplifies tax time.
Manage Payroll and Inventory
If you have staff, you must handle payroll. You can run payroll yourself using software like Gusto ($40-$80/month plus $6-$12 per employee) or ADP ($50-$150/month). These tools calculate taxes, file forms, and handle direct deposits. Alternatively, you can manually calculate payroll, but this is time-consuming and error-prone. For most practices, using a payroll service is worth the cost.
Inventory management is critical for a vet practice. Track your medical supplies and pharmaceuticals. Use your software to monitor stock levels and set reorder points. Regularly count physical inventory to match your records. This prevents overstocking and stockouts, which affect cash flow and client care.
Track Accounts Receivable and Payable
Accounts receivable (AR) is money clients owe you, such as unpaid invoices or pet insurance claims. Send invoices promptly and follow up on overdue payments. Use your software to generate aging reports, which show how long invoices have been outstanding. Aim to keep AR under 30 days. Consider offering payment plans or requiring deposits for large procedures to reduce AR.
Accounts payable (AP) is what you owe to vendors. Pay bills on time to avoid late fees and maintain good relationships. Schedule payments based on due dates and take advantage of early payment discounts if offered.
Prepare for Taxes
Even without an accountant, you must file taxes. Keep accurate records throughout the year to make tax season easier. Set aside a percentage of your income for taxes, typically 25-35% for self-employed individuals, in a separate savings account. Make estimated tax payments quarterly to avoid penalties.
Track deductible expenses: business use of your home, vehicle mileage for business trips, continuing education, and professional licenses. Use a mileage tracking app like MileIQ ($60/year) or Hurdlr ($8-$20/month) to log business miles automatically. At year-end, you can file your own taxes using software like TurboTax Self-Employed ($120-$200) or H&R Block ($85-$120). If your situation is complex, you might still consult a tax professional, but you can prepare the groundwork yourself.
Review Financial Reports Monthly
Generate and review key financial reports monthly: profit and loss (P&L) statement, balance sheet, and cash flow statement. The P&L shows your revenue and expenses, giving you a clear picture of profitability. The balance sheet lists assets, liabilities, and equity. The cash flow statement tracks money in and out, helping you manage liquidity.
Compare your actual numbers to your budget. If expenses are higher than expected, investigate and adjust. Look for trends, such as seasonal fluctuations in revenue or rising supply costs. This review helps you make informed decisions about pricing, staffing, and investments.
FAQ
Can I really do accounting without an accountant? Yes, many small practice owners handle their own books using software and a disciplined routine. The key is consistency: record transactions regularly, reconcile accounts, and review reports monthly. If you get stuck, you can hire a bookkeeper for occasional help, but you can manage day-to-day.
What if I make a mistake in my books? Mistakes happen. Use software with error-checking features and reconcile often to catch errors early. If you find a mistake, correct it promptly. For tax errors, you can file an amended return. Consider using a CPA for a yearly review if you’re unsure.
How much time does this take? Initially, setting up your system takes a few hours. Ongoing, expect to spend 2-4 hours per week on bookkeeping tasks, plus a few hours at month-end for reports. This is less than the cost of hiring an accountant.
Should I still hire a tax professional for my annual return? If your practice is straightforward, you can file yourself. But if you have employees, inventory, or multiple locations, a tax professional can ensure you maximize deductions and avoid errors. Many owners use a CPA just for tax filing, which costs $300-$800 for a small practice.
The Bottom Line
Handling your own accounting is feasible with the right tools and habits. Start by setting up a simple system, track income and expenses diligently, manage payroll and inventory, and review your finances monthly. This saves you money and gives you a deeper understanding of your practice’s financial health. While you may still want a professional for taxes, you can confidently manage your day-to-day books without an accountant.