5 financial management tips for VSE/SME managers

Financial management can be a challenge for a manager of a VSE or SME. Very often, your company performs thanks to the specific skills that you place in the manufacture of your products or the provision of your services. If you don't have a lot of experience in managing a company's finances, this may seem daunting. You could fall into bad financial habits that could one day hurt your business.

As often, 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 sound financial management of your VSE/SME.

Here are five helpful money management tips to help you:

1. Separate 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 current account and another short-term savings account. Both legally and for your ease of management, no commercial transaction 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 on 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 getting paid upfront – even if it's just $1,000 a month – has benefits you can't afford to miss. This helps you pay for your personal expenses and build up your savings. This is crucial if your business does not survive. Pay yourself a fixed percentage of your company's net profit each month, which is revenue minus all operating expenses.

4. Set up a filing and regular billing follow-up

The digitalization of companies is on the way. Whether you opt for a temporary paper filing system or go straight to digital filing, here are some of the things you should keep:

• accounting records and bookkeeping
• Bank statements
• contracts
• permits and licenses
• internal and external employee records
• vendor records
• tax documents
• bills

Invoice regularly and follow up on payments regularly. Every business faces late payments at one time or another. VSEs/SMEs are no exception to the rule. Sound management of your business necessarily involves optimized cash flow and a follow-up of its unpaid bills.

5. Schedule time to stay organized

As said before, sound management of your business finances requires organization. Putting this structure in place 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 have 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 the right reflexes have been adopted, managing your cash flow will be simplified. You will thus have more time and money to devote yourself to your passion: your profession.

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 support them in their financial management.