Starting a business in Thailand is subject to compliance with various Thai laws and regulations. For a foreigner, it includes the existence of a Thai partner in the process of company incorporation if you are not from the United States. Along with this, it is also very tough for foreigners or Thai expats to borrow money from local banks. This calls for the need for a very strong capital management system. This is to ensure that you never fall short of any cash during the course of your business in Thailand.
This article intends to guide you through the process of efficient capital management for your business in Thailand. Before that, let us concisely go the need for a capital management system in your business process –
- Important for Financial Health and Operational Success of Business.
- Maintain a balance between Growth, Profitability and Liquidity.
- Maintain working capital operating cycle to ensure its ordered operation.
- Reflects results of revenue collection, debt & inventory management and payment activities.
- Helps in gathering business financial forecasting models.
- Assists in predictive analysis of the financial status of your business to avoid insolvency.
- Helps in preventing unwanted situations of legal troubles, liquidation of assets and bankruptcy.
The following points will comprehensively highlight the process of creating an effective cash management system. This will further help you never fall short of finances in the pursuance of your business ventures.
Avoid Under Trading or Over Trading
Under trading refers to the situation where your working capital is yielding lower returns in comparison to your competitors or the market potential. Overtrading means that your company is tending to do more business than your finances are allowing.
In both cases, either your working capital is under-utilized or over-utilized with unwanted marginal utility. Hence, be very prominent about the mission, vision and goal of your business. There must be an assurance of its performance at par with the market potential and should not seek more investment tending to over-trading.
Prepare Your Finances Well for your Business in Thailand
You must have a well-planned investment projection report before you start investing in your upcoming business in Thailand. Your investment planning process should follow legitimate steps. It can be like defining the current financial state and your financial goals, analyzing your risk profile, select the right asset allocation mix and classify the asset categories vividly.
You should very prominently identify the various types of risks associated with assets like market risk, credit risk, liquidity risk and interest rate risk. You should also have contingency plans to mitigate crisis or emergencies arising out of such risks.
Rethink and Revise your Registration and Partnership
For setting up your business in Thailand, you should have already gone through the registration process and company incorporation types in Thailand. You must be knowing about Thai limited-liability company, Thai BOI registered company, Thai Public Limited Company or a Thai Partnership Firm. There is also a scope Joint Venture company registration.
The cost varies for different types of company registration. You should research which type of company registration your budget can afford. Along with that, you should also not forget to check the financial and social credibility of your Thai partner in financial terms.
Formulate a Conservative Cash Control Process
Your business must have a conservative cash control plan and process. By this, it is meant that the system should target increased incoming and reduced outgoing capital and cash. For instance, you can ask for advance payments or cash for the services your business is rendering to your clients or customers.
You can take advantage of credit systems in your purchase or resource acquiring process, wherever possible. You can also offer credit terms to your customers when your profit margins are high enough to absorb bad debts. By these methods, you should never fall short of business capital or cash. To avail of this benefit, make sure to register your business with the BOI or EEC in Thailand.
Monthly Cash Flow Forecast Model for Business in Thailand
Predictive analysis of cash flow in and out of your business is very necessary for affirming the rigidity of your capital management system. You must include a robust and flexible monthly cash flow model in your business accounting and finance activities.
You should identify the key cash flow drivers and model them explicitly according to your forecasting needs. Create a transparent model by avoiding hard-coded calculations to facilitate easy usability and audit-ability. Moreover, the forecasting model should be able to generate historical data to analyze the correctness and accuracy of your assumption.
You should also keep yourself updated on the amendments and modifications in the taxation policies announced by the Royal Thai Government. Never miss out on any scope gaining the eligibility for tax exemption or reduction provisions related to the scope of your business or industry.
Now, you have a well-researched business plan and financial analysis report. Additionally, you must be having an investment planning chart, cash flow management and forecasting model as well. With all these, you are having all the tools to create a sustainable capital management system for your business in Thailand.
For proper finance modelling, planning and advisory, mail your requirements at [email protected].
