Recording the money you put in before opening

Every dollar you spend on the practice before it earns anything needs a receipt, a record of where it came from, and a decision with your CPA on how it goes into the books.

Why this money needs a paper trail

Before you open, you're the bank. You pay for the build-out, the exam table, the license and the software, often from personal accounts or cards. It's easy to lose track. Six months later, nobody remembers which charges were for the practice and which were groceries.

That money matters. It's part of what you've put into the business, and it shows up on your Balance Sheet, the report of what the practice owns and owes. If it's missing, your books understate what you've invested, and your CPA has to piece it together from memory.

What to record for each expense

Start a simple spreadsheet with one row per expense and these columns:

• Date
• Vendor
• Amount
• What it was for
• Which account or card paid for it
• Where the receipt is saved

Save receipts in one folder, named by date and vendor. If you paid with a personal card, note it. That detail matters later, because it's how your bookkeeper knows the money came from you and not from a practice account.

Contribution or loan is a decision for your CPA

In the books, money you put in is usually recorded one of two ways. As an owner contribution, it's money you put in as the owner, with no bill to pay back. As a loan, the practice owes you the money and pays it back over time, usually with a written agreement.

Which one fits, and what that means for taxes, is your CPA's call. It can depend on your entity and your plans. Don't pick one on your own. Bring your spreadsheet to your CPA, get the decision, and have your bookkeeper record it that way.

An example with made-up numbers

Here's an example. The numbers are made up. Say you spent $18,400 before opening. That's $9,000 on build-out, $4,200 on equipment, $3,100 on rent and utility deposits, and $2,100 on licensing and software. You paid $11,000 from personal savings and $7,400 on your personal card.

Your bookkeeper records each item where it belongs, as an expense or as something the practice owns. Then the full $18,400 is recorded as either a contribution or a loan, whichever your CPA picks. The practice bank account didn't see that money, but the books do.

The categories matter too. A chart of accounts set up for DPC keeps build-out, equipment and startup software from landing in one catch-all bucket. Our DPC chart of accounts guide shows how those categories fit together.

What I'd do this week

Pull your personal bank and card statements back to the day you started spending on the practice. Highlight every charge that was for the practice and add it to the spreadsheet. If a receipt is missing, note what the charge was for while you still remember.

Then open a business account if you haven't, and move all future practice spending there. Once the practice has its own account, the trail mostly takes care of itself. Every charge on it belongs to the practice, so nobody has to guess. Here's more on why to keep personal and business money separate.

Common questions

What if I lost some receipts?
Use the bank or card statement line and write down what it was for. A statement plus a clear note is far better than leaving the expense out.

Can I pay myself back once the practice has cash?
That depends on how the money was recorded, so ask your CPA first. Repaying a loan and taking money out after a contribution are recorded differently in the books.

Does money I spent a year before opening count?
If it was for the practice, log it. Your CPA decides how far back to go and how it's treated.