Demystifying Business Finance: A Founder's Friendly Guide to Setting Up Shop in Hong Kong

Navigating the world of business finance can feel like learning a new language. Between tax deadlines, profit margins, and cash flow, it’s easy to feel overwhelmed. But, understanding a few key principles can transform your financial management from a source of stress into a powerful tool for growth.

In a recent Women of Hong Kong Community Call, Hong Kong tax and accounting expert, Janani Jayachandar, shared invaluable insights to help business owners build a solid financial foundation. Here are the essential takeaways from our discussion.

Your Tax Toolkit: It’s All in the Details

One of the most immediate ways to improve your bottom line is by understanding what you can claim.

• Claim (Almost) Everything: Did you know that almost all business-related expenses are tax-deductible? This includes the obvious things like office rent and supplies, but also smaller items like client coffee meetings, taxi fares to appointments, and even clothing, hair, or makeup for an important business presentation. The golden rule is that the expense must be related to your business activity. Your action item: Save every single receipt, especially for cash expenses.

  
  

• Be Strategic with Your Pay: How you pay yourself matters. Withdrawing profits as dividends is often the most tax-efficient method. While taking a salary allows for MPF contributions, it’s key to align this with your company's cash flow. You can even declare a salary as payable and withdraw the funds later when cash is available, providing crucial flexibility.

  
  

Your Financial Compass: The P&L and Cash Flow

Your Profit & Loss (P&L) statement isn’t just for your accountant; it’s your business health report.

• Track and Understand Your P&L: This statement helps you track sales, spot unusual charges, and identify forgotten subscriptions that drain funds. It provides the actionable insight you need to understand where your money is really going.

  
  

• Cash is King: Cash flow planning is about the actual money moving in and out of your account. It’s not about invoices sent, but funds received. Create a simple annual budget based on past trends to estimate your month-end cash availability. This prevents shortfalls and ensures you always have the liquidity to operate smoothly.

  
  

Getting the Right Support: Accountants vs. Software

You don’t have to do this alone. Choosing the right support is critical.

• Firms for Growth, Tech for Startups: Online platforms can be a low-cost starting point for basic bookkeeping. However, as your business grows, the personalised service, real-time human advice, and proactive compliance support from a dedicated accounting firm become invaluable. They act as your partner, ensuring you never miss a deadline.

  
  

• Onboard for Success: A good firm will manage your entire money flow from income, expenses, to payroll and tax filings. Having one point of contact for accounting and auditing saves time, reduces errors, and gives you peace of mind.

  
  

Smart Strategies for Pricing and Purchases

• Know Your True Costs: Break down your costs by product or service. You need to know your gross profit (revenue minus direct costs) and your net profit (after all overheads). If your gross profit is negative, your pricing is fundamentally wrong. If net profit is the issue, it’s time to review overheads like rent and subscriptions.

  
  

• Understand Capital Assets: Big purchases like computers or website development can’t be written off entirely in one year. They must be “depreciated” over their useful life (e.g., 3-5 years). Your accountant can advise on whether to expense an item immediately or capitalise it for better tax timing.

  
  

Pro-Tips for Financial Health

• Pay Off Debt First: Before making big reinvestments, prioritise paying off business debts. This frees up cash flow and reduces financial pressure.

  
  

• Leverage Rental Benefits: One of Janani’s most significant tax tips for those who rent their home was to claim a company-funded rental benefit as part of your salary package. This can dramatically lower your taxable income.

  
  

• Paperwork is Protection: If you invest personal funds into the business, or have partners or family who do, establish clear paperwork from the start. Document whether the money is a loan or a capital investment. This clarity is essential for transparency and avoids future disputes.

Taking the Next Step

By mastering these financial basics and partnering with the right professionals, you equip yourself to build a business that is not only passionate but also profitable and secure.

A huge thank you to Janani for guiding such an informative conversation that will assist many aspiring business owners. If you need further assistance, you can reach out to Janani via Instagram or Email, or find out more information on her website. 

Want to continue the conversation? Our community calls and other events are a great place to learn and connect with fellow entrepreneurs. Check out our events page here for more information.