Financial Red Flags in a Private Therapy Practice (and How to Fix Them)

If you’re running a private practice, there are a few financial red flags you really need to watch out for. Ignoring them can lead to serious issues like cash flow problems, tax headaches, underpricing…and in the worst case, having to close your doors.

Just to mention, I'm not a financial advisor or accountant, but I’ve worked with therapists since 2016, and I’ve seen these money issues pop up again and again. So let’s talk about them and keep your practice financially healthy.

Red Flag #1: You Don’t Know Your Monthly Business Costs

This one is huge. So many therapists choose a session rate by looking at what others in their area are charging without knowing anything about those therapists’ circumstances. You don’t know how many clients they’re seeing, what their household finances are like, or if they have a partner covering most of the bills. Your rate needs to reflect your needs, your expenses, and your desired income.

Start by listing all your operational costs: room rental, supervision, training, office supplies, software subscriptions everything. Then, add that to the amount you need to take home each month. That total will help you set a realistic and sustainable session fee.

📹 I’ve got a quick video that walks you through how to calculate your ideal fee. Definitely check it out here!

Open a business bank account. This will help you keep all business revenue and expenses in one place, making bookkeeping much easier. I recommend Starling Bank, as it’s free for sole traders, has an easy-to-use app, and allows you to keep track of payments in real time. Once your account is set up, ensure that all your income and expenses are handled through this account. If you're just starting out, you can put a small amount of capital in the account to get things going. This ensures that you have a clear separation between your personal and business finances from the very start..

Red Flag #2: You Haven’t Raised Your Prices in Years

Everything in your practice goes up in cost over time - software, rent, supervision, training. If your fee stays the same year after year, you’re slowly earning less. You should be raising your rates every year! For new clients and for existing ones. Include this in your therapy agreement so clients are aware up front. Something like: “My fee is reviewed annually and may increase with one month’s notice.”

You don’t need to promise a specific amount, saying you’ll raise it by £5 each year might lock you in when you need to raise it by more.

Also, create an email template you can use each year to let clients know about the fee change. It makes the process smoother and less awkward.

Red Flag #3: You Offer Too Many Discounts

Have you ever found yourself saying your fee... and then immediately following it up with a discount offer, before the client even asks? I’ve heard therapists do this and it’s a sign that you’re not confident in your rate.

Your full fee should be on your website, on your directory listings and in your paperwork. Let clients decide whether they can afford it before jumping in to lower the price. Of course, offering sliding scale or reduced rates is generous but it needs to be sustainable. You can’t run a practice where everyone’s getting a discount. Decide in advance how many reduced-fee clients you can realistically support (e.g., 10–20% of your caseload), and make sure your full fee is high enough to bridge the gap.

Also, practice saying your rate without adding anything else. “My fee is £X.” Then stop. Let it land. Practice doing this out loud, by yourself until you say it without emotional attachment.

Red Flag #4: Clients Are Constantly Paying Late

Late payments can totally mess up your cash flow, not to mention the admin time and emotional labour of chasing clients down. Set clear payment terms from the start. Let clients know when payment is due, and always send invoices so they have a tangible reminder.

You can even consider taking payment in advance or block payments. That way, if someone cancels late, you’re not chasing the fee—they’ve already paid, and you simply refer to your cancellation policy.

I’ve got a full video on how to keep track of client payments and avoid late invoices which you can check out here. 

Red Flag #5: You Don’t Enforce a Cancellation Policy

Whether your policy is 24 hours or one week, you need one and you need to stick to it.Clients are more likely to no-show or cancel last minute if they know there are no consequences. And honestly, therapy isn’t always fun, so sometimes people will look for excuses to skip it.

Put your cancellation policy in your agreement, your welcome email, and your appointment reminders. And when someone cancels late? Enforce it. Even if you let it slide once, let them know it’s a one-time courtesy.

This is your business, you get to decide the rules, but you have to follow them, too.

Red Flag #6: You’re Dipping into Personal Savings Regularly

If you’re using your own savings to cover business costs, something’s not right. Maybe it’s underpricing, late payments, or no-shows but whatever it is, it needs attention.

Start tracking your revenue and expenses monthly. Know what’s coming in, what’s going out, and whether you’re actually paying yourself. You can see my other blog post Why you should do your bookkeeping monthly! for all the reasons this is a good idea.

I have a simple bookkeeping spreadsheet you can use for this and if you purchase it in April, you’ll also get access to a live workshop where I’ll walk you through setup, show you how to use it, and answer questions in real time.

If you want to keep dipping into savings to a minimum, you’ll also need to:

• Revisit your session fee

• Consider new revenue streams (e.g., groups, intensives, digital products)

• Cut unnecessary expenses
  
  

Red Flag #7: You Don’t Have a Business Emergency Fund

What happens if you get sick, need to take time off, or have a big unexpected expense, like your room rent going up? A financial cushion gives you flexibility and peace of mind. You’re not scrambling every time something unexpected happens.

Build this into your fee. Plan for more than four weeks off a year. You may need time for holidays, illness, childcare, or training. And remember: the goal isn’t to earn just enough. It’s to earn more than enough so you can save and feel secure.

Red Flag #8: You’re Not Saving for Taxes

No matter how small your practice is, you’ll need to pay tax. That includes income tax, national insurance, and possibly pension contributions. Set aside 20–30% of your profit for taxes. You can do this manually each month, or automate it using a system like Starling’s "Spaces" to separate your tax savings from your regular bank balance.

Whatever you do, don’t leave it all until the end of the tax year—you’ll thank yourself when the bill comes.

Conclusion

Even if your finances feel a bit overwhelming right now, small changes can make a huge difference. The most important step? Start tracking your income and expenses every month.

Whether you use a spreadsheet, accounting software, or a simple notebook—just start. You’ve got this!

If you want an easy way to get started, you can grab my Sole Trader Bookkeeping Template and, if you purchase it in April, you’ll also get access to a live workshop where I’ll walk you through the setup, show you how to use it, and answer questions in real time.

Here’s to building a practice that’s financially solid, stress-free, and totally aligned with your life.