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5 Actionable Tips for Managing Cash Flow in Hong Kong

8 minute read

Small and medium-sized companies in Hong Kong always face one distinctive issue – cash flow management.

The main problem is that a small business has to balance between earning money and spending more money on business growth. Vendors often demand upfront payments, buyers request long credit terms, and banks are slow and reluctant to offer loans.

The situation is identical in Hong Kong. To help you overcome it, take a look at some tips that will help you with managing cash flow in Hong Kong.


Always keep your books up to date

As a Hong Kong business owner, it should be your priority to have accurate and up to date accounting records at least once a year in order to file taxes properly.

Proper bookkeeping is a guarantee that your small business will meet Hong Kong tax obligations and have a clearer picture of your business’s financial state. Having accurate and up to date records in Hong Kong reduces the likelihood of being audited and also keeps the risk at a minimum. And even if the audit happens, there is no need to worry.

On top of that, accurate bookkeeping can improve business cash flow management in Hong Kong. Since cash flow management is a big issue for many entrepreneurs, you should do your best at bookkeeping to get a more accurate picture of your business’s financial health. Professional accounting and bookkeeping can also help you anticipate and avoid any potential cash flow problems that may pop up.

Finally, it is also vital to get your business invoicing right. Once you deliver a product or a service in Hong Kong, do not hesitate to invoice. Failing to do this could put you at risk of hurting your cash flow and your business.

Hence, make it a habit to send invoices for payment quickly. Fortunately, there are software tools that can help with invoicing and bookkeeping for your business.

Be fair but strict with your consumers

For Hong Kong businesses, satisfying the needs of customers is important, but this does not mean that you should be too lenient on them.

Be fair but remain strict with your customers. Your Hong Kong business should implement a smart and fair invoicing strategy that can bring success in the long run. However, taking formal action is sometimes the only solution.

Monitor your accounts receivable turnover at all times. If you see that it is trending up, think about stepping up your efforts at chasing payments.

You can do this in a few steps:

  1. Set a billing schedule.
  2. Invoice more often.
  3. Link quotes and invoices.
  4. Track time and materials carefully.
  5. Offer online payment methods.
  6. Chase invoices when necessary.

Simplify your Accounting

It is important to keep your accounting clean and simple and also rely on good-quality accounting software if you want to be clear when it comes to your financial situation at all times. This can also help you predict cash flow for planning purposes in Hong Kong.

For instance, you are maybe expecting a big order coming in next month. How can you know if you will have what it takes to expand payroll? Will you be able to buy the needed inventory?

Make sure to get this right or you could miss out on a large opportunity if you slip up. Instead, keep the accounting simple.

It would be great if you could implement payroll software to handle this issue easily. Just remember to choose reliable software that has all the important characteristics such as multiple levels of access, scalable architecture, and tax calculation features.

In addition, if you want to be on the safe side, it is best to hire Hong Kong professionals to provide these services for you. This is always a good idea if you are not sure that you can manage the accounting aspect on your own.

Always separate business and personal finances

In order to understand your business and make accurate cash flow forecasting, you need to separate it from your personal finances. Do not mix up these two, since that could leave you with uncertainty regarding your business performance in Hong Kong.

Keep them separate and you will be in a good position to properly pay yourself and use the extra cash to strengthen and grow your business.

Remember, you should only pay yourself out of your profits, not out of your revenue. When the money starts coming in, never assume that you can pay yourself a big portion of that money.

Have a Cash Reserve

It is fair to say that access to cash can either make or break Hong Kong businesses. Therefore, the ultimate measure when it comes to managing your cash flow like a professional is creating a cash reserve.

A cash reserve provides the leverage you need when you end up in problems due to unexpected events and losses. Additionally, a reserve gives you the confidence and finances you need to grow your business.

Bear in mind that creating a large cash reserve is not always possible in Hong Kong. However, if you manage to do so, rest assured that it will protect you from negative economic events and banks. It will also allow you to take opportunities when they emerge.

For instance, maybe you will get a chance to pick up inventory at a deep discount or take on a larger order. With a decent cash reserve in Hong Kong, you can act fast and take advantage of such situations.

All in all, having a backup cash reserve places you in a position of power. Yes, sometimes it means paying yourself a little less in the short term, but in the long run, it puts your organization on a path to growth and success.

Wrapping Up

Managing cash flow and having a stocked amount of cash is definitely something you want to do to get your business off the ground in Hong Kong. This will allow you to be stable but also free to seize any opportunity that may come around.

However, the most important thing is that you will be able to make better plans for the future of your Kong Kong business. So, exercise good spend management and you won’t have to worry about bad scenarios or potential crises.

What now?

Well it’s simple! If you have any questions about getting your business started, get them all answered by having a free consultation call with our experts.

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