Accounting For Psychologists Newsletter #3

I hope you’re all healthy. It’s been a really challenging few weeks here. In August, six of the Sheridans team were out sick with covid. Fortunately, no one has became seriously ill.

It’s really got me thinking about how things never really go how you expect them to.  So, one of the themes of this month’s newsletter is insurance both personal and professional.

On the personal insurance side I’ll look at Income Protection insurance, Total Permanent Disability and Life insurance.

From a professional perspective, I’ll explain about Professional Indemnity insurance and Public Liability insurance and suggest some other types of insurance worth considering.  

The other topic I’ll look at is delegation, which certainly relates to our experience here at Sheridans this month.

Before we get started, here are some important tax dates for your calendar.

Personal Insurance

There are three main types of personal insurance, and you can buy them privately or through your super fund.  Did I remind you today that if you’re self-employed you still should pay yourself super?  Your future self will thank you.

Income Protection Insurance

Your capacity to generate income is one of your greatest financial assets, so it’s definitely worth protecting.
Income Protection insurance pays part of your income when you are unable to work due to sickness or accident for up to 5 years. Generally, you can insure up to 75% of your salary.

Total Permanent Disability Insurance

Total Permanent Disability insurance (TPD) pays a lump sum if you become totally and permanently disabled because of illness or injury. It provides a financial safety net to help pay for medical and rehabilitation costs as well as mortgage and personal debt. You can decide on the amount of TPD cover depending on your responsibilities and your financial situation.

Life Insurance

Life insurance, also commonly known as Death Cover, pays a lump sum of money when you die. The money goes to the people you nominate as beneficiaries on the policy.

Life insurance may also come with Terminal Illness Cover. This pays a lump sum if you're diagnosed with a terminal illness with a limited life expectancy.

With Life insurance, you can choose the level of cover you want. This will depend on your savings, how much you have in your super fund, and what mortgage or other debts you have.

Professional Insurance

As a practicing psychologist you are obliged to have Professional Indemnity Insurance (PI). Here’s a brief outline of what it is.

Professional Indemnity Insurance

Professional Indemnity Insurance (PI) protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.[1]

Professional indemnity claims can arise from genuine mistakes such as giving an incorrect diagnosis, incorrect advice, or losing documentation. It also covers breaches of privacy.

PI insurance can cover your legal costs, compensation costs and time spent away from your business. It can also protect the reputation of your business because you’ll be able to afford to go to court to defend yourself and your decisions, rather than quietly offering a compensation payment to avoid the expense of legal action.

AHPRA has very strict rules about PI. It mandates that all psychologists must have PI in order to register and to practice psychology. AHPRA makes it very clear that the PI must cover all aspects and locations of your practice whether you are working in the government or the private sector, whether you are full-time, part-time, self-employed or a volunteer.

The amount of cover you should have depends on the nature of your practice.  The aim is to have enough to meet the legal liability if a claim is made against you. Cover starts from $2,000,000 and goes up to $20,000,000.

Some policies have ‘automatic reinstatement’ which means that the amount that you’re insured for will be restored for a new claim, if a claim has already been paid out.

If you are employed, your employer will probably have PI in place, but it is worth checking what their arrangements are.

If you are self-employed, you will need to make your own PI arrangements and have a Certificate of Currency, or other documentation showing that you have current PI.

If you carry out a combination of employed and self-employed roles, you will need to have PII arrangements which provide appropriate cover for all aspects of your practice.

If you’re currently not practicing, but registered, you’re not required to have PI, but you must have what’s known as run-off cover, which protects you against claims arising from the time you were practicing. Run-off cover may be part of a PI policy or may be purchased separately. If you’re planning to take maternity leave or an extended break, it’s worth checking that you have this in place.

Public Liability Insurance

Public Liability insurance is important cover for any business that interacts with members of the public. It covers against liability for personal injury or property damage to a third party. For example, if a client slipped at your clinic and injured themselves, public liability insurance would cover their claim.

Other Types of Professional Insurance

Other types of insurance to consider if you are a self-employed psychologist are business insurance, which can cover damage due to fire, weather or theft and may include Business Interruption insurance which protects you for lost revenue if your business is unable to operate, and Cyber insurance, which covers network security, network interruption, liability connected with data breaches and so on.

If you’d like to discuss any of these, call or email me. I will be able to put you in touch with a qualified insurance advisor who can help you find the right insurance mix for you and your business.

Delegation

Feeling overworked?  This month I certainly am! I’ve also heard more than one self-employed psychologist say they’re feeling stressed out by all the things they need to do.  If that’s the case for you, start by looking at the big picture.  Are the tasks that are making you feel stressed ongoing or likely to occur again?  Or are they something that can be solved by a couple of hectic days and a family sized block of chocolate?

If it’s likely to continue or recur you need to think about things long term and how you can delegate – that is get someone else to do some of your work so that you are not going to be so busy anymore.  Yep, it’s that simple.

As a self-employed psychologist, there are three areas of your business that you can delegate:  general administration, appointments with clients, and accounting and finance.

General administration duties like booking appointments, cancellations, following up clients and chasing payments can easily be outsourced.  You can employ an admin person part-time or use an outsourcing company.  Recently, I’ve started to see a lot of people using virtual admin staff. 

Look at it this way, if you’re seeing a client, around 50 minutes of the time you spend with the client will be way more than what you pay for one hour of the time of your admin staff (depending on fees and wages). Both you and your admin person can do what you’re each good at and feel job satisfaction.

Appointments with clients can be delegated. You must be wondering – how can I possibly delegate that?!    Well, if you have a waiting list of at least four weeks, and I know for some psychologists, it can be four months or more, it might be worthwhile employing another psychologist and delegating some of the appointments to them.  It may seem extreme but think about it in the long term. Is a long wait for an assessment in the best interests of your clients?  Do you see your number of clients changing significantly to a more manageable number in the next year or so? Or, do you see your client numbers continuing to grow?    

Accounting and finance can also be delegated.  To save costs, I know a lot of psychologists do their own bookkeeping and tax returns and, to be fair, some of them do an excellent job of it. However, I’m not sure if they all enjoy doing it.

In the interests of focusing your time on the tasks that bring the most benefit to your business consider delegating your book keeping. This is what a bookkeeper can do for you:

• Process invoices, receipts, payments, and other financial transactions
• Process and maintain your payroll system
• Reconcile bank accounts
• Prepare reconciliation reports
• Manage your accounts receivable and accounts payable
• Prepare your monthly or quarterly BAS statements

Delegating to an accountant can add value beyond preparing and lodging your tax return.  Your accountant can also offer advice on tax and tax planning and can help with decisions about your business – what business structure to use, whether you have the means to expand your business or take on employees etc.  They can also analyse and interpret your business numbers and offer advice and solutions.

The thing is delegation is easy in theory but in practice it’s hard. As a self-employed psychologist you may feel that it’s your responsibility to do everything yourself and know each and every aspect of your business inside out.  Take a bit of time out and think about your capacity - time-wise and mentally - and not just now, but in the long term.  Think about what tasks you can delegate to people who specialize in those areas freeing you up so that you can focus on what you do best – looking after your clients’ mental health and well-being.  With a strong team, you can accomplish so much more.

As always, feel free to share these articles with your colleagues and friends.

I’m pleased to say that our book “Sorted” is in the final stages of printing. It’s about getting your personal finances SORTED and explains the 8 key areas of personal finance:

• Personal Budgeting
• Savings
• Investments
• Taxation
• Debt
• Insurance
• Retirement
• Estate Planning

It includes checklists and clear information about how to get your personal finances organised.

I'm looking forward to sharing it with you.

Do you have any suggestions for future newsletter topics? Let me know!

Stay healthy!

Until next month,

Fairuz

[1] Source : https://www.cgu.com.au/explore-business/understanding-liability-and-indemnity