Welcome to the "What To Know Before Opening a Mental Health Practice" series by Kristin Trick, MA, LPC-S, RPT. Drawing from a decade of diverse clinical experience spanning psychiatric hospitals, nonprofit agencies, and private practice, Trick shares the top 5 lessons she wishes she had known before becoming a solo practitioner. Packed with practical advice and insights from her journey, this series supports mental health professionals looking to establish a thriving and sustainable practice.

A counselor may have exceptional clinical skills and be highly regarded by their clients. If they cannot expertly manage money, though, their private practice tenure will be short-lived.

Graduate school programs for counselors rarely require courses in finances, which is regrettable since most of us join the profession to help people, not to balance numbers. It is only when we are already in the field that we learn the complexities of running a business.

Having operated a profitable counseling practice for several years, there are a few mental health practice financial choices I recommend to other counselors who hope to open their own business. 

These choices help protect cash flow management and liquidity, support patient care, and strengthen financial stability without changing your voice as a clinician. Learning to read basic financial statements and adopting simple systems that streamline daily workflow can go a long way toward long-term sustainability — even for a new mental health practice.

Seed money serves as the initial investment to start your medical practice. It lowers anxiety when needs arise because you already have a source of funds. Before opening, review your personal finances to decide how much you are willing to invest. 

Consider what you need to purchase at the outset, along with the estimated costs for at least 6 months. Once you have calculated this number, transfer that amount from your personal account into a business checking account to keep cash flow simple and visible.

For its kickoff, I chose to invest $5,000 into my practice. That cushion has helped whenever regular business income is compromised, such as when clients' insurance deductibles reset or session pay rates are reduced. The seed money also helps me measure my practice's financial success. 

I treat it as the baseline of income, which makes it easier to track cash flow, watch accounts receivable, and keep an eye on basic key performance indicators.

Monetary crises for private practitioners typically fall into two predictable categories. Planning ahead can help you avoid disruption and stay focused on client care. Here are the two most common issues to prepare for:

Seed money lets you purchase initial supplies and later restock or revamp items without disrupting operations.

To avoid going into debt, private practitioners must be well-prepared for insurance companies to To avoid going into debt, private practitioners must be ready for insurance companies to make abrupt changes. These shifts can include reductions to session rates, where you are suddenly paid less for work already scheduled. 

While working with one plan, I learned of an approximately twenty-dollar decrease for family sessions after I had already delivered several. In response, I scheduled more individual sessions and reserved the final 10 to 15 minutes for speaking with parents, which can be a simple risk management adjustment. 

If you are choosing panels, review your insurance mix regularly so you are not exposed to one plan.

Insurance changes can also involve clawbacks, where the company requests you return money from claims it already paid. Causes often include documentation gaps uncovered during audits. 

Events like these can be stressful. Rely on seed money to make repayments so your financial stability is not threatened while you correct records and appeal when appropriate.

Clients may change coverage or lose it during treatment. I met a client twice weekly for several months whose insurance payments were substantial. The client then shared that a divorce would end coverage by the end of that week. 

Do not expect benefits to remain the same from intake to discharge; verify at intervals and have a clear plan for self-pay or referrals if coverage ends.

A wise move when approaching your mental health practice finances is to set up a business checking and savings account. This helps you manage client and insurer payments efficiently and simplifies taxes. It also strengthens practice management by supporting clear financial reporting and accurate financial statements, such as the balance sheet and income statement. 

Choose a different institution from your personal bank to keep records clean.

Arrange for client and insurance payments to be deposited directly into this account. Challenge yourself to keep the balance above your seed money so you have funds for emergencies and a clear real-time view of activity. This habit also makes it easier to gauge your practice's financial performance over the month. 

Pay yourself on a schedule by transferring money from the business account to your personal checking account. I typically pay myself each quarter on the same day I make quarterly tax payments to the IRS, which keeps timing consistent and paperwork simple.

Savings should support both your tax obligations and long-term growth. Keeping this account organized and purpose-driven helps protect your day-to-day operations. 

Here's how to manage it effectively:

A steady reserve keeps big purchases predictable and supports calm, organized finances throughout the year.

Attempts to project your monthly income as a private practitioner can appear impossible. Multiple streams of income from numerous clients and insurance plans, all deposited at unique intervals, may overwhelm you and complicate your workflow. The importance of controlling your practice's finances is matchless, though, and you can develop a system that works for you.

I felt the strain of financial planning for my business almost immediately after I opened it. Though I had initially only contracted with two payers, I struggled to keep up with delays and denials. While my electronic health record (EHR) platform monitored payouts, I needed a hands-on method to track revenue cycle progress and make informed decisions.

After trying several strategies, I found that a dry-erase board calendar with a coding system was my remedy. At the start of each month, besides opening hours in my EHR calendar, I write these hours on a large dry-erase wall calendar. When clients schedule appointments, I draw an empty shape next to the corresponding hour on the board:

While checking my business accounts once or twice a week, I compare the deposits shown to my EHR system and then shade in the shapes on my calendar. This habit helps me spot unpaid appointments quickly, monitor accounts receivable, and reduce stress when payments arrive on different schedules.

Another tactic that has increased my peace with my mental health practice finances is determining how many appointments I need to schedule within a month to make a profit.

If you vacation often or are a parent who anticipates school breaks, this approach pays dividends. You will know the exact number of sessions your practice needs to provide that month, which supports calm decision-making and financial stability.

Knowing exactly how many appointments you need to break even each month can reduce financial stress and improve decision-making. Here's how to calculate that number:

Most private mental health practices share common expenses. Budgeting for these items monthly ensures smoother operations and better financial planning. Here's how to organize your list:

Here's how to manage each key area of spending in your private practice budget. Keeping these categories organized will help you stay ahead of recurring costs and minimize financial surprises:

As your mental health practice finances stabilize, look for other ways to earn without losing focus on clients. Many clinicians enjoy adding supervision, consultation, or training. A strong network often opens these doors and helps your practice reach more people. 

These options support high-quality care and long-term sustainability in the healthcare industry, allowing you to share expertise, protect your time, and keep your core schedule steady.

Running a mental health practice takes more than clinical skill — it requires smart, sustainable financial planning. From setting aside seed money and separating business accounts to tracking expenses and planning for time off, these initiatives lay the groundwork for operational efficiency and long-term success.

Streamlining your revenue cycle, monitoring key performance indicators, and integrating automated medical billing will reduce denials and strengthen your financial reporting.

Ready to improve and optimize practice management and financial stability? Visit Tebra to find tools, templates, and expert guidance designed specifically for healthcare providers and mental health professionals. You can request a free demo to get a quick walk-through of scheduling, documentation, telehealth, and billing in one place.