Mental Health Practice Accounting: COA Template & Account Hierarchy

Posted In | Finance | Accounting Software | Chart of Accounts

Running a mental health practice involves managing various aspects of the business, including accounting. A crucial component of accounting is the Chart of Accounts (COA), which organizes financial transactions into categories to help maintain accurate financial records. In this article, we'll discuss the significance of a well-structured COA for mental health practices, provide an example COA template, and explain the account hierarchy system.

 

Understanding the Chart of Accounts (COA)

A Chart of Accounts is a list of accounts used to record financial transactions in a systematic way. A well-organized COA helps businesses maintain accurate financial records, track expenses and revenues, and generate meaningful financial reports. In a mental health practice, the COA should be tailored to meet the specific needs of the industry.

 

Example COA Template for Mental Health Practices

The following example COA template is designed for mental health practices. Note that each practice may have unique requirements, so it's essential to customize the template to suit your specific needs.

 

1. Assets
 

1.1. Current Assets

1.1.1. Cash

1.1.2. Accounts Receivable

1.1.3. Prepaid Expenses
 

1.2. Fixed Assets

1.2.1. Furniture & Equipment

1.2.2. Leasehold Improvements

1.2.3. Accumulated Depreciation
 

1.3. Other Assets

1.3.1. Security Deposits

 

2. Liabilities
 

2.1. Current Liabilities

2.1.1. Accounts Payable

2.1.2. Accrued Expenses

2.1.3. Deferred Revenue

2.1.4. Line of Credit
 

2.2. Long-Term Liabilities

2.2.1. Long-Term Loans

 

3. Equity

3.1. Owner's Capital

3.2. Retained Earnings

3.3. Owner's Draw

 

4. Revenue

4.1. Service Revenue

4.1.1. Therapy Sessions

4.1.2. Group Sessions

4.1.3. Teletherapy
 

4.2. Other Revenue

4.2.1. Workshops & Seminars

 

5. Expenses
 

5.1. Payroll Expenses

5.1.1. Wages & Salaries

5.1.2. Payroll Taxes
 

5.2. Rent & Utilities
 

5.3. Office Supplies
 

5.4. Professional Fees

5.4.1. Legal & Accounting

5.4.2. Consulting
 

5.5. Marketing & Advertising

5.6. Continuing Education

5.7. Insurance

5.8. Travel & Entertainment

5.9. Depreciation & Amortization

5.10. Miscellaneous Expenses

 

Account Hierarchy

The account hierarchy in a COA is essential for organizing accounts and making financial reporting more manageable. A hierarchical structure groups accounts into categories and subcategories, making it easier to locate specific accounts and summarize financial data. The hierarchy in the example COA template consists of five main categories: Assets, Liabilities, Equity, Revenue, and Expenses. These categories are further divided into subcategories to provide more detail.
 

A well-structured Chart of Accounts is crucial for maintaining accurate financial records and generating insightful financial reports in a mental health practice. By customizing the example COA template provided in this article and using a clear account hierarchy system, mental health practitioners can effectively manage their practice's finances. To further enhance the efficiency of your accounting processes, consider utilizing accounting software designed specifically for mental health practices. These software solutions often come with pre-built COA templates tailored to the industry, making it easier to set up and maintain your financial records. As your practice grows and evolves, remember to review and update your COA periodically to ensure it continues to meet your needs and remains compliant with industry standards and regulations. By investing time and effort into creating and maintaining an organized COA, mental health practitioners can better understand their practice's financial health, make informed decisions, and ultimately provide high-quality care to their clients.