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How Many Bank Accounts Should an Optometry Practice Have?

by | Dec 23, 2023

What’s the best way to plan for expenditures? Practice owners try any number of strategies. Some use spreadsheet budgets while others sit on a mountain of cash (at least we know we won’t run out!). Some even have separate accounts for key expense areas, as well as for savings. 

After working with more than one hundred different practices at Books & Benchmarks, we’ve noticed that optometrists often make things more complicated in their efforts to feel in control of their businesses.

One popular approach is to use multiple accounts for revenue, owner’s compensation, other operating expenses, tax planning, and even profit. Let’s take a look at the pros and cons of using multiple bank accounts to run your business. 

Complicated Isn’t Cost-free 

If you’re paying different bills out of different accounts, you’ll immediately find yourself needing to keep track of each account’s balance. For example, if you pay payroll from a separate account and forget to transfer funds, you’re going to have an awkward conversation with your team about why they weren’t paid on time. 

On the other side of that coin, practices that budget for different expenses using separate accounts can end up accruing excess cash in those accounts. We’ve already written about how much cash a practice needs. But if you have multiple accounts, how can you easily determine the right amount for each? Do you have a plan to withdraw excess funds from those accounts periodically?

That’s the biggest issue with having many accounts: managing multiple account balances takes up mental energy that is better spent focusing on things like improving patient care, nurturing a great team culture, or growing your practice. Also, when it comes to managing optometry bookkeeping, constantly transferring funds between accounts dramatically increases the risk of accounting errors. 

A Simpler Approach 

For most practices, one or two bank accounts are more than enough. Almost all expenses are consistent and predictable. Payroll, rent, software licenses, and loan payments don’t change much from month to month. The only financial items that tend to fluctuate are revenues and cost of goods. One account that takes in revenue and pays the bills IS enough. It’s simpler to manage because you only have to look in one place to know if you can cover your next payroll or lab bill. 

However, there are a few instances where separate accounts make sense. First, if you want to set aside funds for estimated taxes in the practice, that’s a good reason to have a separate account. Talk with your CPA and financial advisor about whether to make that a personal or business account. Personal accounts tend to get higher interest rates, but some advisors would still have you pay your taxes through a distribution from the business. 

There are two other situations where having a separate account makes sense. One is for larger, predictable, expenses that don’t happen often. If your practice has a profit-sharing plan on top of your 401k (or a SEP IRA), it is smarter to fund those contributions throughout the year. This way, you won’t end up with a single obligation of $50,000 to $80,000. The other case is if you’re saving for a down payment on a building. Again, whether to make these accounts business or personal is a discussion to have with your advisors. 

Multi-site Calls for Multiple Accounts 

If you have multiple locations, just think of the previous advice as applying to each office. If each office has a different tax ID, they need to have separate accounts. If multiple locations are under one tax ID, having separate checking and credit card accounts for each office is a great way to easily track the revenue and expenses of each location separately (known as “classing” in bookkeeper-speak). 

Optometry Is Already Complex Enough 

Between managing the revenue cycle from third-party payers (insurers and vision care plans) and managing inventory in your optical, there are plenty of challenging financial processes that need attention in an optometry practice. There’s no need to add the complexity of tracking multiple account balances and regularly transferring funds to your plate. 

Ready to simplify your optometry practice’s finances? Reach out to our expert team of bookkeepers at Books & Benchmarks today. We can help you streamline your financial processes, manage your accounts efficiently, and ensure accuracy in your accounting. Don’t let multiple accounts complicate your business—let us handle the numbers while you focus on providing exceptional patient care. Contact us now for personalized assistance and take control of your practice’s finances.

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