From financial statements to acquisitions to general sales, my daily workload is filled with all things finance as the chief financial officer for Leap Partners. For many business owners, financial tasks can seem overwhelming, complicated and daunting, especially for those who own small to medium-sized businesses. I know this well because, day in and day-out, I work with these leaders. I guide the small businesses Leap has acquired to secure their financial standing, and from that experience, I have learned a lot about common trends and errors that businesses make regarding their finances.

I recently spoke with a friend about common mistakes I see and the general advice I would give to business leaders.

1. Organization of profit and loss statements

The most prominent mistake that I see consistently regards companies’ profit and loss statements. Many times, the financial statements aren’t split out and detailed by service line. While it is usually easy and straightforward to track revenue to a specific service line, it is important to track profitability by service line versus only looking at revenue.

Service lines tend to have wildly different profitability, and this volatility can lead to confusion when analyzing an unorganized profit and loss statement. Looking at a combined statement with no segmentation will not let you truly analyze your service lines. What sections of your business are driving down your profitability? Alternatively, what is truly driving that profitability?

One thing I always recommend to each business owner to get back on track is to find a best practices organization in your industry. You will get instant access to a peer network of those you can trust, and many times, they will have templated profit and loss statements for you to apply to your business.

2. Proper structure, timing and management of profit and loss statements and accounts receivable

Many owners are not running their profit and loss statements on an accrual basis. There are timing differences in revenue and expenses, so essentially, they are not properly matching their revenue and expenses in the right time frame. This causes wide variations in their monthly performance. Proper accrual timing of revenue and expenses is essential to having accurate financial statements. Partner with your CPA and accounting teams to make sure your revenue and expense timing are matched.

I’ve also seen a lot of examples of accounts receivable being unhealthy across different companies. I always recommend staying on top of your receivables, because chasing money is no fun and costs a lot in unproductive time. I would always advise collecting before you leave the home or business after a job is complete. Even if this requires paying a credit card fee, swipe before you leave. Sometimes, you might even have to let some customers go if they are fighting over bills months after the work has been completed. In the end, it will save you time and money.

Proper accrual timing of revenue and expenses is essential to having accurate financial statements. Partner with your CPA and accounting teams to make sure your revenue and expense timing are matched.

3. Owner discretionary and one-time finances mixed with company expenses

For this topic, I feel like I’ll have to give an acquisition-minded answer to easily explain it. Any reasonable buyer is going to understand that there are likely going to be owner-discretionary, possibly non-business costs or one-time charges to the business. What is important is being able to clearly outline those to anyone trying to buy your business. Giving a thorough explanation shows transparency and honesty, as well as clears up any confusion that may arise.

4. Shaping internal processes

What processes or organization strategies can help your company? The depth of the team, for example, can be particularly important. You have to make sure the owner is not wearing every hat across the company. Having a capable and trustworthy staff at all levels can help alleviate so much of the stress from the owner and lead to more efficient processes across all departments.

This can apply to software as well. Having a competent team running your financial and field software goes a long way because we often find that the issue isn’t the software but how it’s being used by the company. There are so many great field service software options out there, and it’s essential your company utilizes one. Also, ensure that you have had professional help implementing this software and integrating it within your company processes.

Ultimately, securing the finances of small businesses comes down to the skills these talented leaders already possess. Ensuring organization across all documents and systems, while also appropriately managing the projects internally, is essential to managing finances. After working with so many different home services companies, I know that managing styles and processes always vary; but the path to securing their finances can always be clear with strong leaders at the helm.