Financial management can be a challenge for a manager of a VSE or SME. Often, your business performs thanks to the specific skills you place in manufacturing your products or providing your services. If you don't have a lot of experience managing the finances of a business, this may seem daunting. You could fall into bad financial habits that could one day harm your business.
As is often the case, the first step is to train yourself. You need to learn basic business management skills. Performing simple accounting tasks, writing a loan application or a basic financial plan or even being able to understand a balance sheet are basic skills necessary for any entrepreneur. Training and organization are two key words for healthy financial management of your VSE/SME.
Here are five useful financial management tips to help you:
1. Split your professional and private finances
Don't take the risk of mixing your funds. In the event of a tax audit, it would be a disaster. Open a business checking account and another short-term savings account. Both legally and for your ease of management, no commercial transactions should pass through your personal accounts and vice versa.
2. Save for your taxes
This is what the short-term savings account mentioned in the previous tip is for. Each month, you or your accountant will need to calculate your pre-tax profits, which is your income for the month minus your operating expenses. By saving on a monthly basis, you ensure that you have the cash on hand to pay your taxes. With a little hindsight and with the advice of your accountant, you can also opt for advance tax payments, a significant financial advantage.
3. Pay yourself a salary
As a newbie entrepreneur, it can be tempting to put all your money into day-to-day operations. But paying yourself from the start – even if it's just €1,000 per month – has benefits you can't afford to miss. This helps you pay for your personal expenses and build your savings. This is crucial if your business is not sustainable. Pay yourself a fixed percentage of your business's net profit each month, which is revenue minus all operational expenses.
4. Set up regular filing and billing tracking
The digitalization of businesses is underway. Whether you opt for a temporary paper filing system or directly for digital filing, here are some of the elements you should keep:
- accounting and bookkeeping records
- Bank statements
- permits and licenses
- internal and external employee files
- supplier registers
- tax documents
Invoice regularly and track payments regularly. Every business faces late payments one day or another. VSEs/SMEs are no exception to the rule. Healthy management of your business necessarily involves optimized cash flow and monitoring of its unpaid debts.
5. Schedule time to stay organized
As said previously, sound management of your business's finances requires organization. Setting up this structure is a first step but it will be useless if you do not keep this organization up to date. Set aside time each week or month to keep your finances up to date. Regularly, you will have to encode your accounting data, digitize it and classify it. You will need to send your invoices and payment reminders on a fixed date.
We know that the financial management of a VSE/SME requires time and motivation, but your efforts will not be in vain. Once you have adopted the right reflexes, managing your cash flow will be simplified. This will give you more time and money to devote to your passion: your job.
At the house of INTERNATIONAL RECOVER COMPANY®, we believe that VSEs and SMEs are essential pillars of our economy. This is why, since 1993, we have been supporting them in their financial management.