If you’re a do-it-yourself-er—whether to save money or stay in control—bookkeeping probably isn’t something optometry school prepared you for.
Now, we firmly believe most practice owners are better off focusing on patient care, growing their business, or even taking a well-deserved nap instead of managing their own books. And of course, we think we’re a great firm to handle your optometry practice bookkeeping! But if you’re not quite ready for that, let’s start with the basics.
I talk to many owners who keep their own books religiously (“I reconcile my accounts every month and I check them daily!”) yet still struggle to understand their practice’s financial performance beyond keeping an eye on their bank balance. And hey, if the bank balance is going up, that’s a good sign, right?
So, what separates books that are accurate enough for tax season from books that provide valuable insight into your practice? It all starts with a well-structured Chart of Accounts.
Design First, Then Build
There’s a reasonably large number of discrete “buckets” you can use to categorize transactions in your practice. However, if they’re not organized thoughtfully, many practices end up with their expenses sorted alphabetically. Maybe Cost of Goods Sold (COGS) is in a group before Gross Profit. But everything else? Alphabetical.
The Chart of Accounts is how you lay out the buckets you’re going to use to track transactions in your practice. Often, each account will be numbered, with the 1000-level numbers delineating key sections for the Balance Sheet (assets, liabilities, equities) and the Profit & Loss Statement (revenue, COGS, expenses). Subcategories within these groups are assigned smaller numbers to provide more detail.
At Books & Benchmarks, we use a modified version of the 7 Key Expense Areas, with payroll divided into three distinct categories:
- Cost of Goods Sold
- Non-OD Staff Compensation
- Associate OD Compensation
- Owner Compensation
- Occupancy Costs
- Marketing
- Equipment
- General Office Overhead
When setting up your Chart of Accounts, find the right balance of detail and clarity. You want enough granularity to provide useful insights, but not so much that you lose sight of the big picture. Our Chart of Accounts is designed so that, with major categories collapsed, the Profit & Loss Statement fits on about half a page. Fully expanded, the P&L is still under two pages long.
DIY Until You Delegate
As a consultant, I see delegation as a major opportunity for any business owner. That said, for newer or less involved practice owners, getting hands-on with your financials can be incredibly valuable—at least for a season.
When you’re ready to step beyond that phase or simply want your financials set up correctly by industry experts, we’re here to help. Reach out to us to ensure you have accurate, insightful financial reports exactly when you need them.
