Essential French Bookkeeping: A Comprehensive Guide to Recording Income and Expenses

Reading time: 12 minutes

Table of Contents

• Introduction to French Bookkeeping
• Legal Frameworks and Requirements
• Understanding the French Chart of Accounts
• Recording Income: Methods and Best Practices
• Tracking Business Expenses Effectively
• Digital Transformation in French Accounting
• Common Challenges and Solutions
• Conclusion
• Frequently Asked Questions

Introduction to French Bookkeeping

Feeling overwhelmed by the prospect of managing books for your French business? You’re in good company. France’s accounting system has a reputation for being particularly structured—but that’s actually good news once you understand the framework.

The French accounting system (comptabilité) follows the Continental model, which is notably more codified and statutory than Anglo-Saxon systems. This means there are clear rules to follow, which, once mastered, can actually simplify your record-keeping process.

French bookkeeping isn’t just about keeping track of numbers; it’s about creating a financial narrative that satisfies both regulatory requirements and business intelligence needs. Whether you’re a freelancer (auto-entrepreneur), running an SAS (Société par Actions Simplifiée), or managing a SARL (Société à Responsabilité Limitée), understanding how to properly record your income and expenses is fundamental to your success in the French market.

Let’s break down what makes French bookkeeping distinctive and how you can turn these requirements into strategic advantages for your business.

Legal Frameworks and Requirements

French accounting practices are governed by the Plan Comptable Général (PCG), a standardized chart of accounts that every business must follow. Unlike more flexible systems, the PCG provides a comprehensive framework that defines how transactions should be categorized and recorded.

Key Legal Obligations Based on Business Structure

Your bookkeeping requirements vary significantly based on your company structure:

• Micro-entrepreneurs (formerly auto-entrepreneurs): Enjoy simplified bookkeeping with only income recording requirements and no need for formal financial statements. However, you must maintain a chronological record of all receipts.
• Small businesses (EURL, SARL with turnover below thresholds): Require more detailed accounting but may qualify for simplified presentation of annual accounts.
• Standard commercial companies (SAS, SA, larger SARLs): Must maintain comprehensive double-entry bookkeeping with full compliance to the PCG.

Consider Marie’s experience: “When I transitioned from micro-entrepreneur to SARL status for my design consultancy, the jump in accounting requirements was significant. I went from simply tracking income to implementing double-entry accounting. The learning curve was steep, but having structured accounts gave me better insights into my business performance.”

Record Retention Requirements

Don’t underestimate the importance of record-keeping durations in France:

• Accounting books and supporting documents: 10 years
• Employment records: 5 years
• Bank statements and financial correspondence: 5 years
• Invoices and contracts: 10 years

Recent legislation has clarified that digital records are acceptable, provided they maintain integrity, are stored in their original format, and remain accessible for the required retention period.

Understanding the French Chart of Accounts

The Plan Comptable Général isn’t just a suggestion—it’s the fundamental structure around which all French accounting revolves. Understanding this framework is essential for proper record-keeping.

The Seven Classes of Accounts

The PCG divides all accounts into seven primary classes:

1. Class 1: Capital accounts (equity, loans, provisions)
2. Class 2: Fixed asset accounts (property, equipment, investments)
3. Class 3: Inventory accounts (stock, work-in-progress)
4. Class 4: Third-party accounts (customers, suppliers, employees, state)
5. Class 5: Financial accounts (bank, cash)
6. Class 6: Expense accounts (purchases, services, taxes, personnel costs)
7. Class 7: Income accounts (sales, subsidies, interest income)

Each transaction must be recorded in the appropriate account, using the standardized numbering system. For example, account 607 is specifically for “Purchases of merchandise,” while 706 represents “Services revenue.”

As Antoine, a Lyon-based restaurant owner, explains: “Initially, I found the PCG restrictive, but now I appreciate how it forces organization. When I need to analyze specific expense categories, everything is already perfectly segmented.”

Recording Income: Methods and Best Practices

Proper income recording isn’t just about regulatory compliance—it directly impacts your tax obligations and financial clarity.

Invoice Requirements

In France, invoices must contain specific elements to be legally valid:

• Sequential invoice number
• Issue date
• Company details (name, address, SIRET number, RCS registration)
• VAT identification number (if applicable)
• Customer details
• Description of products/services
• Unit price excluding VAT
• VAT rate and amount
• Total amount including VAT
• Payment terms and due date
• Late payment penalties (mandatory)

Pro Tip: Establish a rigorous invoicing system that automatically includes all required elements. This prevents compliance issues and accelerates payment processing.

Cash vs. Accrual Accounting

French businesses generally must use accrual accounting (comptabilité d’engagement), where transactions are recorded when they occur, not when payment is received or made. However, there are exceptions:

• Micro-entrepreneurs can use cash accounting
• Liberal professions have certain allowances
• Small businesses below certain thresholds may have simplified options

The choice between cash and accrual accounting has profound implications for your business’s financial representation. Consider this comparison:

Tracking Business Expenses Effectively

Expense tracking in France requires both precision and a thorough understanding of deductibility rules. Let’s navigate this critical aspect of bookkeeping.

Deductible vs. Non-Deductible Expenses

Not all business expenses are created equal in the eyes of French tax authorities. Understanding the distinction between deductible and non-deductible expenses is crucial:

Common Deductible Expenses:

• Rent and utilities for business premises
• Employee salaries and social charges
• Professional fees (accounting, legal)
• Office supplies and equipment
• Business travel and vehicle expenses (with limitations)
• Advertising and marketing costs
• Interest on business loans

Frequently Non-Deductible Expenses:

• Personal expenses of business owners
• Certain fines and penalties
• Excessive entertainment expenses
• Luxury vehicle costs above thresholds
• Certain taxes (e.g., corporate income tax itself)

Case Study: Pierre’s architectural firm faced a tax audit that questioned several entertainment expenses. “We learned to meticulously document the business purpose of each meal and meeting, including attendee names and discussion topics. Now we maintain a digital repository of receipts with detailed notes that clearly establish the professional nature of each expense.”

Receipt Management Systems

The days of shoeboxes filled with receipts are over. Modern French bookkeeping demands more sophisticated approaches:

• Digital receipt capture apps: Solutions like Receipts by Wave or Expensify allow immediate capturing and categorization of receipts
• OCR technology: Automatically extracts relevant data from paper receipts
• Integration with accounting software: Ensures expenses flow directly into your bookkeeping system

For expenses to be properly deductible, they must meet the “3C” criteria beloved by French tax authorities:

1. Constated (documented with proper proof)
2. Comptabilized (properly recorded in your books)
3. Coherent (reasonable and appropriate for your business)

Well-implemented expense tracking doesn’t just satisfy tax requirements—it provides crucial business intelligence about your spending patterns and profitability drivers.

Digital Transformation in French Accounting

French accounting has undergone significant digital evolution in recent years, with electronic processes increasingly becoming mandatory rather than optional.

Electronic Invoicing Requirements

France is gradually implementing mandatory electronic invoicing (e-invoicing) for all B2B transactions. The rollout schedule is as follows:

• July 2024: Large businesses must issue e-invoices
• January 2025: Medium-sized businesses must issue e-invoices
• January 2026: Small and micro businesses must issue e-invoices
• By 2026: All businesses must be able to receive e-invoices

This transition represents one of the most significant changes to French bookkeeping practices in decades. Businesses must prepare by implementing compatible systems that can generate, transmit, and store invoices in the required formats.

Software Solutions for French Bookkeeping

Selecting the right accounting software is critical for efficient French bookkeeping. Key considerations include:

• Compliance with the Plan Comptable Général
• Support for French tax declarations (TVA, etc.)
• E-invoicing capabilities meeting upcoming requirements
• FEC file generation (Fichier des Écritures Comptables)
• Multi-currency support if operating internationally

Popular solutions adapted for French requirements include:

• Sage 100cloud Comptabilité: Comprehensive solution for medium to large businesses
• QuickBooks Online: Offers French localization with PCG compatibility
• Indy: Tailored for freelancers and micro-entrepreneurs
• Pennylane: Modern cloud-based solution with strong collaborative features

Whatever solution you choose, ensuring it can generate the FEC file is non-negotiable. This standardized electronic accounting file must be provided to tax authorities during audits.

Common Challenges and Solutions

Even seasoned business owners encounter obstacles with French bookkeeping. Here are some frequent challenges and practical approaches to overcome them.

VAT Complexities

The French Value Added Tax (TVA) system features multiple rates and specific rules that can be bewildering:

• Standard rate: 20% (most goods and services)
• Intermediate rate: 10% (accommodation, restaurants, transport)
• Reduced rate: 5.5% (essential foods, books)
• Super-reduced rate: 2.1% (pharmaceuticals, newspapers)

Beyond the rates themselves, determining which rate applies and managing VAT recovery can be complex. For instance, VAT on restaurant meals is partially recoverable, while VAT on accommodation is fully recoverable if for genuine business purposes.

Solution: Consider implementing a specialized VAT management module within your accounting software that automatically applies the correct rates and handles recovery rules. For complex situations, quarterly consultations with a French tax specialist can prevent costly errors.

Navigating Year-End Procedures

French year-end accounting procedures involve several specialized entries:

• Provisions: Accounting for anticipated expenses or losses
• Accruals and deferrals: Ensuring expenses and income are attributed to the correct period
• Depreciation calculations: Following specific French depreciation rules
• Inventory valuation: According to French GAAP principles

Case Study: Sophia, who runs a small manufacturing business in Toulouse, shares: “My first year-end closing was chaotic because I hadn’t prepared the necessary adjusting entries. Now I maintain a year-end closing checklist and start preparations in November, which has transformed the process from stressful to methodical.”

Solution: Create a comprehensive year-end closing schedule with clear responsibilities and deadlines. Consider engaging a French accountant specifically for period-end procedures if this isn’t your area of expertise.

Conclusion

French bookkeeping may initially seem like a labyrinth of codified rules and specific requirements, but this structure ultimately creates clarity once mastered. The Plan Comptable Général provides a consistent framework that, when properly implemented, delivers rich financial insights alongside regulatory compliance.

As we’ve explored, the keys to successful French bookkeeping include:

• Understanding your specific obligations based on business structure
• Implementing proper income recognition practices
• Developing robust expense tracking systems
• Embracing digital transformation and appropriate software solutions
• Proactively addressing common challenges like VAT management

Whether you’re a freelancer managing basic income tracking or running a complex organization with full double-entry requirements, the principles remain consistent: accuracy, thoroughness, and systematic record-keeping.

Remember that effective bookkeeping isn’t just about satisfying tax authorities—it’s about creating financial clarity that enables better business decisions. In France’s highly structured system, this clarity becomes a competitive advantage for those who embrace rather than resist the framework.

Frequently Asked Questions

Do I need to hire a French accountant for my small business?

While not legally required for most small businesses, engaging a French accountant (expert-comptable) is highly advisable. French accounting follows specific rules that differ significantly from international standards. At minimum, consider hiring an accountant for annual reviews and tax declarations, even if you handle day-to-day bookkeeping yourself. For businesses with turnover exceeding €8.1 million, appointing a statutory auditor (commissaire aux comptes) becomes mandatory.

What are the penalties for bookkeeping errors in France?

Penalties vary based on the nature and severity of the errors. Minor unintentional errors might incur interest charges of 0.2% per month on underpaid taxes. More significant errors can result in penalties of 10% for good faith errors, 40% for negligence, and up to 80% for fraudulent activities. Beyond financial penalties, serious accounting irregularities can lead to criminal charges for company directors. The best protection is maintaining meticulous records and seeking professional guidance when uncertain about requirements.

How do I handle foreign currency transactions in French books?

All transactions must ultimately be recorded in euros in your official French accounts. When dealing with foreign currencies, record the transaction using the exchange rate on the transaction date. At month-end and year-end, monetary items (cash, receivables, payables) in foreign currencies must be revalued using current exchange rates, with exchange differences recorded in specific accounts (676 for exchange losses, 776 for exchange gains). For significant foreign currency activities, consider implementing specialized multi-currency accounting software that handles these conversions and adjustments automatically while maintaining the audit trail required by French authorities.