The challenge of good finance management for micro-enterprises and SMEs

5 mins

July 13, 2022

In order for a company to thrive over time, business leaders need to combine their sense of entrepreneurship with finance. In fact, good finance management is one of the foundational pillars that can ensure the long-term success of an SME from the moment it’s created. Spoiler alert: keeping an eye on your account balance doesn’t cut it.

What are best practices when it comes to SME finance management? What kind of data do you need to track? How do you make sure it doesn’t become a source of stress and uncertainty? Here are our tips to help you run your business with ease.

Micro-enterprise/SME finance management: useful tips to get you started

You don’t need to be a CPA to run your business well from day one. But it certainly helps to have a good grasp of some basic entrepreneurial finance concepts.

Finance basics for businesses: the essentials

There are several key figures to keep in mind that allow you to take stock of your business’ financial health - as well as its profitability. And, to avoid the hassle of calculating these figures every time you need them, you can build out a dashboard that automatically does the work for you. That way, you have a real-time view of your data, with minimal effort.

Here are some basic management principles you ought to know:

Working capital (le besoin en fonds de roulement or BFR): this is the difference between the influx and outflux of company cashflow. In other words, it is the liquid capital a company has at its disposal to operate.
Net treasury: Net treasury is the total value of available funds in a company’s accounts once short-term costs and expenses have been settled. The state of your treasury is a primary indicator of the overall financial health of your company.
Net income: this is the sum that remains after all the expenses (including any taxes paid by the company) are deducted from the revenue produced by a business, i.e. its actual monetary gains.
Gross profit margin: this is the difference between the sales price of goods or services and the cost price. This is a helpful indicator of whether or not the good or service is well-priced.

Of course, there are plenty of other figures out there you could monitor. But it’s up to you to determine which are the most relevant for your business.

Know that tracking your sales revenue isn’t enough - it’s far more constructive to have a good grasp of how profitable your business is.

Writing up your first business plan

Most business leaders start by setting out a business plan (article in French) before launching their company. This development plan forces you to examine your business goals, your strategy, as well as how you intend to structure your company. It’s a great way to test how viable your idea is, and it can also give you a glimpse into how your business will perform in the real world.

Among the financial tables you’ll need to prepare for your business plan, financial forecasts can give you an on-the-spot snapshot of your business’ assets, but they can also help you track their changes over time.

Taxation and accounting obligations for your legal status

Inevitably, there are taxation and accounting requirements you need to handle, no matter the legal status of your company (SAS, SARL, etc.).

Read up on how much you need to pay in charges (social charges, VAT, etc.). For example, an SAS has to pay an average of 75% of net compensation in social charges for payroll.
Be prepared: as soon as you pay out your employees’ salaries, calculate their respective social charges and set them aside, even if you only need to submit them to the State at a later date.

Systematically doing your accounting and getting ahead of both your taxation and accounting requirements can help avoid any nasty surprises further down the line.

Setting out with the right tools in hand

In order to launch an SME and deposit your share capital, you need to open a business account. There are many options that are 100% online, like Qonto, which also include advanced tools to help manage your business (customizable payment methods, dashboards, invoicing tools, etc.).

You can even connect your business account to your favorite accounting software so your transactions and receipts can feed through automatically.

Check out this list of popular business management tools we’ve put together to help you get started on the right foot.

There is a whole range of State aid available for micro-enterprises and SMEs. Whether it’s assistance with workers’ rights, HR or even business development, there is help out there for just about every step in your business journey.

Adapting your finance management to the growth of your SME

Getting financing

Great news - your company is showing healthy growth, and now you’re looking for external financing.

You can request a bank loan or get a loan from a platform specifically oriented towards SMEs. Qonto has recommended partners who offer financing for your business, 100% online.

You’ll have to adapt your finance management to take these new funds into account. You can work with your accountant to find the type of investment best suited to your business needs.

Get a handle on your invoicing and payment deadlines

Do you know what the number one cause of bankruptcy is for small businesses? Late payments. Micro-enterprises and SMEs are more likely to be thrown off-kilter than bigger firms when client payments come through past their due date. Minimize your risk by:

Getting a tool that gives you visibility over pending invoices and allows you to automatically follow up on payment. Save time with minimal effort.
Sell your invoices with Edebex to reduce the wait time for payment. Your cash flow will thank you.

With Qonto, you can follow up with clients on invoices directly from your account. Thanks to our integrated invoicing tool, you can build custom invoices directly from your Qonto app. You can even track the status of each invoice and follow up on payments in just a few clicks.

Keep a close eye on your budget, as well as your ratios

Monitoring your finances isn’t just something you should do at the outset of your business project. It’s a day-to-day job that’s needs to happen throughout the entire lifespan of your company. And as your SME develops, your usual financial benchmarks are likely to evolve over time. You can redefine these benchmarks with your CPA and adapt your dashboard accordingly. It’s also quite important to optimize your budget management to limit your business’ financial risk.

Using the right tools to support your business

Like most business leaders, you want to dedicate as little time as possible to managing your finances so you can focus on what’s important: your company. All the more reason to leverage tools to save you time.

Qonto offers dashboards that are integrated with your business account for a real-time view of your cash flow. You can even see how you’re spending your money by category.
Pick an accounting software that also allows you to make detailed financial projections and forecasts.
Work closely with your CPA. They’re your secret weapon for effective finance management. You gain from their expertise and together you can forge a winning plan of action for your SME.

SME finance management is often seen as veritable cross to bear for business leaders. But don’t forget that if well prepared, finance management can actually contribute to the overall success of your company. We hope that you found these finance management tips helpful. With the right tools you can conserve your most precious resources - your energy, your time and your ambition, all while optimizing your finance management.

Launching your business? With Qonto you can open a 100% online business account in under 10 minutes.

ABOUT THE AUTHOR

Panama Harris

Panama is a Copywriter at Qonto with over 15 years' previous experience working as a freelancer around the world. Her mission is to take the mystery out of entrepreneurship and make it more accessible.