What are Allocation Guides?
Allocation Guides are Heard’s budgeting tool to help you manage your private practice finances. It's a customizable tool that helps you determine how to distribute your business profits. The Allocation Guides will calculate the amount of profits to allocate to each bucket you defined based on the percentage you allocated to that bucket.
Heards recommendation
Your Allocation Guide includes your practice transactions for that month, and it is entirely customizable to support your financial goals. Each month, your bookkeeper will generate your Profit and Loss statement (Bookkeeping > Profit and Loss). This is based on your monthly profit, or what's left of your earnings once you've paid your monthly expenses. Of that profit, we will calculate where those profits should go.
As a general guideline, we recommend the following allocations:
- Tax Savings: 30%
- Owners Distribution: 50%
- Retirement: 5%
- Rainy Day Savings: 15%
We want to empower you to review your Monthly Insights and set or update your allocation guides to reflect what makes the best sense for you. You can access and set up Allocation Guides in your Heard account by going to Bookkeeping > Allocation Guides.
How are Allocation Guides calculated?
Based on the guide you established, Heard will calculate how much money you should set aside to stay on track with your saving goals, taxes, and even paying yourself. You can assign a percentage to each bucket to distribute your monthly business net profit, and we'll provide you with estimates on how much to allocate based on your profit.
For example, let’s say your business generated $3,000 in monthly net profit for January.
Private Practice Income: $5,000
Private Practice Expenses: -$2,000
Monthly Net Profit: $3,000
The Allocation Guide will use your $3,000 profit to calculate how much you should distribute to each bucket based on the percentages you set up.
Tax Savings (30%): $900
Owners Draw (50%): $1,500
Rainy Day Savings (15%): $450
Retirement (5%): $150
How do I set up an allocation guide?
Set up your Financial Allocation Guide to decide how much money to set aside for taxes, retirement, paychecks, and more. On the 15th of every month, we'll send over a “paystub” with suggested dollar amounts based on your previous months' earnings. To set up your Allocation Guide:
- Go to Bookkeeping > Allocation Guides
- Click the Start button
- Under Allocation Type, enter the title of each allocation.
- Under Percentage of Profit to Allocate, enter the percentage of allocation.
- To add more, click Add additional Allocations.
- When you’ve set your allocations, click the Review button at the bottom of the page.
- Click the Back button to make changes, or click Confirm & Set to apply the allocation preferences to your account.
- Click Back to Dashboard to return to your Dashboard.
Once you’ve completed setup, your next allocation guide will be sent to you on the 15th of the next month after we've gone through and completed your books. In this allocation guide, we will provide suggested amounts to allocate based on your previous months' earnings and your allocation preferences.
How can I make changes to my allocations?
As your private practice goals change, you can edit your Allocation Guide anytime. To do so:
- Go to Bookkeeping > Allocation Guides.
- Next to “Your Current Allocation Guide,” click Edit.
- Under Allocation Type, enter the title of each allocation.
- Under Percentage of Profit to Allocate, enter the percentage of allocation.
- To add more, click Add additional Allocations.
- When you’ve made your updates, click the Review button at the bottom of the page.
- Review your allocated monthly earnings, and click the Confirm & Set button at the bottom of the page.
Your next allocation guide will be sent to you on the 15th of the month after we've completed your books. In this allocation guide, we will provide suggested amounts to allocate based on your previous months' earnings and your allocation preferences.
Please note: Making edits will not historically change your prior months' Allocation Guides.
What do I need to complete to receive monthly allocation guides?
Your bookkeeper will need to have your books completed in order for the Allocation Guide to generate. To ensure your books are completed timely, we recommend that you maintain regular communication with your bookkeeper for timely bookkeeping by:
- Uploading bank statements
- Check Messages awaiting your reply
- Review transactions in Bookkeeping>Needs Review
When are the allocations posted?
Allocation Guides are typically generated 15 days after the month's end. For example, January’s Allocation Guides are generated on February 15th. To guarantee prompt Allocation Guides, we recommend maintaining regular communication with your bookkeeper for timely bookkeeping; for more information, see: How can I ensure accurate bookkeeping?
What should I do after receiving my monthly Allocation Guides?
The steps you choose to take after receiving your Allocation Guides for the month are entirely up to you. You can choose to review your allocation guides as information about how to allocate your earnings.
You can also choose to move your earnings into the appropriate bank accounts.
Unfortunately, Heard can’t move your money for you. You will need to transfer your money manually. This can be done by transferring money (check, business transfer, cash, etc.) from your business account to the allocated buckets within your Allocation Guide.
Your bookkeeper will then categorize these transfers accordingly. For example:
- Owner’s Distributions are transfers from your business account to your personal account (bank transfer, cash, Zelle, etc.)
- Tax Savings are transfers from your business account to a business and/or personal savings account. This savings account can be specifically used for tax saving purposes or a general savings account.
- Retirement can be transferred out via a business transfer (aka Owner’s Draw) to your retirement investment account.
- Business or Tax Savings is a transfer from your business account to a business or personal savings account, whichever you prefer.
How can I generate the allocation guide for a month?
Typically, the allocation guide should be automatically generated on the 15th of the following month, but you can also manually create an Allocation Guide through the following steps:
- Go to Bookkeeping > Allocation Guides.
- On the right-hand side of the page, locate “Create a New Allocation Guide."
- Select a month to create an allocation guide.
- Click Create Guide.
How can I update the allocation guide for a month?
The numbers in your monthly allocation guides are estimates based on the Allocation Guide you created and the information we have when the monthly allocation guide is generated. If you need to update a monthly allocation guide to include additional profit that’s been added to your books for that month or to pull in updates made to your Allocation Guide percentages, you can update the allocation guide through the following steps:
- Go to Bookkeeping > Allocation Guides.
- Under “Past Allocations,” locate the month you want to update.
- Click the Update button.
- Click Confirm Changes.