How to Use AI to Automate Financial Workflows for Your Therapy Practice

With a few simple AI prompts, you can speed up your therapy practice’s financial back office routines and free up more time to focus on your clients.

Is AI ready to replace a human bookkeeper or accountant? Not yet. But large language models (LLMs) are good at sifting through data, categorizing items, and summarizing information. That makes them well-suited for simple back office tasks.

Here are five ways you can use AI to speed up bookkeeping and accounting for your therapy practice now, complete with prompts.

What to know before using AI for financial tasks

Before you start using AI to automate financial workflows in your therapy practice, it’s important to understand both the benefits and the limitations. 

While AI can streamline tasks like invoicing, reporting, and claims management, there are a few key considerations to keep in mind to ensure accuracy, compliance, and data security.

Privacy could be an issue

AI platforms have differing privacy agreements. Some may use your data to train the AI as a whole, while others use it only to train the AI serving your own particular user account. You may have trouble finding out exactly how data is stored or which third parties have access to it.

With that in mind, take time to read over privacy agreements for tools like ChatGPT. Privacy-minded consumer guide websites like PrivacySavvy can also provide some insight into different products.

Before entering any data (financial data, in particular) into an AI prompt window, ask yourself: If someone else got ahold of this information, what would the consequences be?

AI and HIPAA

In many cases, AI tools are not HIPAA compliant. Carepatron’s integrated AI tools are a rare exception. This means that, within the platform, PHI related to billing, invoicing, payment processing, and insurance claims is protected in stringent and secure ways. 

By adhering to HIPAA regulations, Carepatron provides you with a secure environment to manage financial tasks, guaranteeing the confidentiality of client information. 

When it comes to using AI for financial tasks, it is absolutely critical that you check the compliance measures of any AI tool you work with, and ensure they appropriately adhere to HIPAA regulations.

Accuracy is never guaranteed

Most AI platforms are now upfront about the fact that their output may be inaccurate or misleading. There is no direct human oversight when it comes to each answer AI provides, and it’s up to the AI itself to make judgements based on its instructions.

So double-check any data or advice you get from an AI tool, and make sure to get a second (human) opinion before making any major decisions based on data from AI.

Human bookkeepers and accountants can’t be beat

When all is said and done, it’s human bookkeepers and accountants who will provide you with the best financial data and advice. 

Using AI for your financial back office is fine when your practice is new and still has lots of room to grow. It’s like a simple spreadsheet you use to track your spending and earning: It fulfills a basic need until you’re ready to upgrade

When your accounting and bookkeeping become more complex, and you need to be able to talk to a human about your finances, then it’s time to hire a bookkeeper or accountant.

Choosing an AI platform

The number of AI platforms available has exploded in recent years. You can compare them and choose the one that suits your needs.

For the sake of creating the examples below, this article uses Claude. Developed by the AI startup Anthropic, Claude promises a user-friendly experience. It also advertises itself as a more private and secure option compared to other platforms, like ChatGPT.

To use Claude—or to get full functionality out of ChatGPT—be prepared to create a user account. Free accounts come with limitations. In the case of Claude, it’s a cap on the number of questions you can ask within a certain time period. Signing up for a paid account will get you more functionality and, potentially, faster performance.

How to generate ledger entries for your therapy practice with AI

The general ledger is the central document of your bookkeeping system. It’s the place where every transaction is recorded. Whenever you earn money, it shows up in the general ledger. Whenever you spend money, it shows up there as well.

If you use a spreadsheet to do your own bookkeeping, it’s up to you to manually enter each transaction. To save time, you can use AI to analyze your transactions, categorize them, and present them in a form you can copy and paste into your spreadsheet.

There are two easy ways to do that: By uploading bank statements, and by uploading scanned receipts for expenses.

Generate general ledger entries from bank statements

So long as you’re comfortable with it, you can upload a bank statement downloaded from your practice’s online checking account and AI will create general ledger entries based on the data.

First, you first need to upload a chart of accounts. The chart of accounts includes all the accounts—or transaction categories—you use to categorize your entries.

For this example, we’ll use Heard’s complete chart of accounts for therapists.

Next, you’ll upload your bank statement. For the example below, we’re using a bank statement for an imaginary therapy practice called Mindful Horizons, LLC. Full disclosure: This bank statement was generated by ChatGPT.

Here’s the prompt we give Claude.

I'm going to upload a chart of accounts I use to do bookkeeping for my therapy practice. In the prompt following that, I will upload a bank statement for my therapy practice's checking account. Based on information in the chart of accounts, generate ledger entries for all of the transactions in the bank statement. Deliver them as a PDF I can download. After receiving the current prompt, confirm that you understand what I have instructed you to do and await further prompts.

Here’s a snippet from the chart of accounts we’re using, to give you an idea of what it looks like.

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Once we upload the chart of accounts, here’s what Claude has to say.

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Sounds good. Now we upload the bank statement. A sample of what that looks like.

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Once we upload the bank statement, Claude goes to work. 

Here’s the output from Claude.

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As you can see, Claude has categorized each transaction from the bank statement, organized them all by date, and split them up into debits and credits. 

“Debit” and “credit” are terms used in double-entry bookkeeping. They signify money entering an account and leaving an account, respectively.

Provided you already have a bookkeeping spreadsheet set up, you should be able to copy and paste this information into it and get a complete set of ledger entries for the month in question.

Bonus: Claude also creates a summary for all accounts.

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Generate general ledger entries with scanned receipts

You can also scan receipts—or download digital versions—to have AI analyze them and enter them into your general ledger.

This is helpful if you’re not comfortable uploading bank statements, or if you make business purchases with cash.

For a complete general ledger, you’ll also need to provide information on your income. This could take the form of proof of payment documents or invoices from your EHR software.

Here’s the prompt.

I'm going to upload a chart of accounts I use to do bookkeeping for my therapy practice. In the prompt following that, I will upload eight scanned receipts for purchases made using my therapy practice's checking account. Based on information in the chart of accounts, generate ledger entries for all of the receipts. Deliver them as a PDF I can download. After receiving the current prompt, confirm that you understand what I have instructed you to do and await further prompts.

First, we upload the chart of accounts. We’ll use the same one as before.

Then, the receipts. If these scanned receipts look a bit wonky, it’s because they were generated by ChatGPT.

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The AI then “reads” the receipts and generates ledger entries based on the information they contain.

Here’s a sampling of Claude’s output based on the receipts above.

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Claude categorizes each receipt based on the type of business it came from, debiting the expense and crediting the checking account.

How to generate profit and loss statements for your therapy practice with AI

Along with the balance sheet and cash flow statements, profit and loss statements (P&Ls) are one of three key financial statements businesses use to track their finances. 

Simply put, a P&L summarizes all the income and expenses for a particular month, showing how much your business has earned, how much it has spent, and how much it has kept as profit.

P&Ls are based on information in your general ledger. To generate one, simply upload a month’s worth of ledger entries and tell AI to do the work.

Here’s the prompt.

I'm going to upload general ledger entries for my therapy practice. Generate a profit and loss statement based on those entries.

Once we’ve uploaded those entries—the same general ledger entries Claude generated in our last example—we get a perfectly organized P&L.

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According to this P&L, Mindful Horizons is operating at a loss. Good thing this is just an example.

Claude also runs some basic analysis on our P&L, and asks if we’d like more.

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When we ask Claude for more analysis, this is what we get.

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It’s good to take this sort of analysis with a grain of salt. Claude doesn’t know everything there is to know about our (fictional) business, so it’s limited in the type of guidance it can give.

But the math adds up, and most of what it recommends—like exploring alternative revenue streams—is sound.

Create a budget for your therapy practice with AI

Your budget is the guide you follow to stay profitable and keep your practice running smoothly.

A good budget takes into account your average expenses and your average income and sets achievable goals for making sure you stay in the black.

To get a tool like Claude to create a comprehensive budget would take a lot of fiddling around: Uploading financial data, specifying your goals, and ranking the importance of each item to your business. Ultimately, you might find using AI to create a budget this way would take as much time as it would to do it yourself.

But to get a start on budget building, we can ask AI to analyze our past finances and create a budget that reflects our current situation. Then, it can look at the data and provide some advice for altering the budget to make it more sustainable.

Here’s the prompt.

I'm uploading bank statements from my therapy practice's checking account. Based on my bank statements, generate a new and sustainable monthly budget plan I can follow.

And here’s some of what Claude outputs.

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Since our imaginary business is operating at a loss, Claude’s budget likewise has us travelling down a path to ruin. Note the discrepancy between total income and total fixed expenses.

Claude can’t tell us exactly what to do to balance our budget, but it can provide some general recommendations.

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By taking the budget Claude has generated based on our current situation, following its recommendations, and applying some of our own ingenuity, we should be well on the way to building a new, better budget for our practice.

Create financial projections for your therapy practice using AI

Financial projections are models of how your business may perform in the future. Accountants create them by reviewing your past financial reports, but may take supplementary data into account, too—like broader economic trends, a new budget, or expectations of growth.

We can get AI to create basic financial projections for us by providing it with a collection of P&Ls and balance sheets—two essential reports for financial planning—and asking it to infer future performance based on the data.

Here’s the prompt.

I am uploading profit and loss statements and balance sheets for my therapy practice. Based on the data in these financial reports, create financial projections for six months, one year, and two years from now.

For this example, we’re using six months of imaginary financial statements generated for our business by ChatGPT.

Here’s a look at some of Claude’s output once we upload the statements.

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It’s still not looking good for our imaginary therapy practice. Claude has projected its current net-negative performance into the future.

Here’s a summary, and some of Claude’s recommendations for improving the situation.

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A big part of what makes financial projections useful is the ability to model different scenarios.

Let’s say we’ve resolved to take on more clients and move to a home-based office, significantly decreasing rent.

Here’s the prompt to model it.

Revise the financial projection you created. Assume I take on seven more clients and reduce my rent expense by 50%.

With this information, Claude generates a new set of projections for six months, one year, and two years from now.

It gives us a tidy summary and analysis of the new projections, plus actionable advice for meeting our goals.

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With this kind of analysis from Claude, we get hard numbers demonstrating our new strategy will work, plus some things to keep in mind as we put the plan into action.

Generate boilerplate agreements for your therapy practice with AI

Every therapy practice depends on boilerplate documents: Various intake forms, consent forms, policies, and questionnaires used to collect information from (and deliver information to) new clients. 

Check out The Complete List of Policies and Paperwork for Your Therapy Practice for a comprehensive guide.

You can pay for packages of boilerplate paperwork provided by a third party, or you can even take on the gruelling task of writing these documents yourself. But it’s much easier to generate them with AI.

Here’s the prompt.

I run a psychotherapy practice. Generate a client financial responsibility agreement I can have new clients sign before they begin treatment.

A sample of the output.

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You can now enter your own information to customize it to your practice.

We can also get AI to generate a good faith estimate form in compliance with the No Surprises Act.

‍I run a psychotherapy practice. Generate a good faith estimate form I can have new clients sign before they begin treatment.

Here’s a sample.

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We can even take a shot at having Claude generate an intake questionnaire.

‍I run a psychotherapy practice. Generate an intake questionnaire for adults that I can have new clients complete before they begin treatment.

Here’s a sample of the output.

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Naturally, you should review the questionnaire carefully and make sure it’s in line with your areas of expertise and the type of treatment you provide. 

But an AI-generated questionnaire is a good start. And by creating your own prompts you can, with practice, customize the type of output AI delivers so it meets your specific needs.

Key takeaways

• While larger practices should plan to work with professional bookkeepers, AI can be a useful tool for financial admin when your practice is just starting out.
• Never share highly sensitive information with AI, and never enter client information (most AI tools are not HIPAA compliant).
• AI is adept at compiling and processing large amounts of data—like bank statements or general ledger entries—and summarizing them into reports.
• Although it can’t replace the work of knowledgeable accountant, an AI tool like Claude can provide solid, actionable advice based on the information you give it
• Consider using AI to generate boilerplate paperwork for your therapy practice and save yourself some time and energy.

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Heard is the only financial management software built for therapists that enables you to manage your business and personal finances, all in one place. Schedule a free consultation to learn more here.