Introduction

Welcome to our Financial Reports template. Compulsory financial statements are reports that businesses are required to submit to regulatory authorities by law. These documents should provide transparency into the financial performance of the business. Bookkeeping software like Xero or Quickbooks generates various financial statements based on accounting entries, but if you are drafting up your own reports, these templates will give you a great base to start from!

Financial Reports Template (empty)

Download this to your own device to add your inputs and customize for your use.

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Guide to using the Financial Reports Template

1. Income statement (also known as  Profit and Loss statement):This is a quarterly or yearly report that will be readily available to the public. Should clearly outline the inflow of new assets as well as the outflow incurred to produce revenue. It is recommended that you start with your revenue. Expenses and costs are then deducted closely followed by taxes. This leads to the calculation of your profit.
2. Balance sheet: Instead of showing your funds over a given period, the balance sheet shows your assets (what you own) and liabilities (what you owe) and the difference between them at the moment you produce the balance sheet. The difference between the assets and liabilities reveals the book value of the stakeholders’ stake in the company. Assets must be listed from most to least liquid (what can be made into money/ sold fastest). Liabilities are listed in order of immediacy.
3. Statement of cash flows: this statement reveals where the funding comes from and what it is used for (e.g. operations or investments). A statement of cash flow should show the ability of your company or organization to pay bills while funding future growth.

For your additional reference, further information about financial statements with examples can be found here.

Relevant Templates

FSI has prepared for you the essential templates that facilitate your bookkeeping. Click the links below to check them out!

The post Financial Reports Template for Small Businesses appeared first on Foundation for Shared Impact.

Introduction

Welcome to our all-inclusive Bookkeeping Template for Small Businesses. Our user-friendly bookkeeping template is designed specifically for small businesses, offering a convenient and efficient way to log transactions, generate monthly summaries, and compile annual reports. Whether you’re a seasoned entrepreneur or just starting out, our template will streamline your bookkeeping process, providing you with valuable insights into your business’s financial health. Download the template below to customise it for your own use, and read our guides and tips to learn how to best make use of the template!

Bookkeeping Template (empty)

This is an empty template that includes a general ledger and monthly & annual summaries. Download this to your own device to add details of your business transactions.

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Read the next section for a detailed guide on how to make use of the template.

Guide to using the Bookkeeping Template

Listen to this explainer video that illustrates and demonstrates how to use our bookkeeping template. We have also written down detailed explanations of each tab and field of the template and how to use it, one by one, so continue reading to find out more!

For your additional reference, here is a version of the template with dummy data included so that you can see how the automated reflections and formulas work.

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Explaining the Bookkeeping Template

1. Ledger (All transactions) tab

• The “Ledger” tab is where you log all individual transactions your business makes. We recommend you record transactions on a daily basis so as to not miss any.
• The “Date” logs the date of each transaction that occurred in the following format: DD/MM/YY. If the date is not recorded in the format, it will show a red alert because the cell has a data validation rule set up. Thus, make sure to follow the specific format.
• The “Account Type” column is for classifying what kind of transaction has been made. When you click the arrow button next to each cell, you will be able to see the dropdown choices. The choices are linked to the “Account Type List” tab, where you can manage and edit the choices you want to show. If you want to know more about how to work on the “Account Type List” tab, jump to the relevant section (#2. Account Type List) below.
• The “Description” column is where you add more information and context about the transaction so that it is easier for your team or auditors to make sense of the transaction that has taken place. We recommend you be descriptive.
• The “Amount” column is where you record the respective transaction amount in Hong Kong Dollars. If your business has some transactions in other foreign currencies, reflect the amount in Hong Kong Dollars. For example, if you have paid for a subscription with a credit card that costs 39 USD, it should have an actual explicit Hong Kong dollar value on your credit card statement.
• The “Transaction Method” column can be optional but we recommend you use this to properly keep track of the nature of a respective transaction e.g., if the transaction was done through a bank transfer, cash payment, etc., similar to the Account Type column, if you want to add more with the transaction method types, you can go “Transaction Method List” tab and add the types there. To read more, jump to the relevant section (#3. Transaction Method List) below.
• The “Payment processed?” column can be used to keep track of payments processed (made, or received), so that you can differentiate the payments incurred (per the transaction date) and the actual processed time of cash inflow or outflow.
• The “Source/Link” column is an optional column you can use to note the links to relevant invoices or bank statements. It is desirable to include relevant invoices, receipts, or links to cloud folders (e.g., Google Drive) to keep track of the relevant source and evidence of the respective transaction. This will become especially handy when you’re dealing with annual audits.

There are four columns filled in grey with the tag “(Automatic)” – these are automatically populated fields that you do not need to manage. To briefly explain the roles of the four columns:

• The “Month” column is calculated automatically from the “Date” column and enables you to see the summarised monthly and annual data in the “Transaction Summaries” tab.
• The “Financial Year” column is also calculated automatically from the “Date” column and enables you to see the summarised monthly and annual data in the “Transaction Summaries” tab.
• The “Balance” column shows the value in its actual nature. In other words, an expense will be shown as a negative number, and an income item will be shown as a positive item. This automatic conversion, derived from if the respective Account Type is an “Income” or an “Expense”, enables you to see proper monthly and annual totals.
• The “Income or Expense” column is an automatic labeling of an Account Type based on whether it is an “Income” or an “Expense”. If it is an expense, it will, among others, make the number negative in the “Balance” column. This allows for proper calculation of monthly and annual totals, such as the tab for Monthly Statements.

2. Account Type List tab

• The “Account Type List” tab is where you can manage the dropdown options that you see in the Account Type column in the Ledger tab. If you want to add a new account type, simply add it to the list of the types you already have on the “Account Type List” tab. For better record-keeping purpose and for easy comprehension of your team, make sure you are correctly classifying each account type as an income or an expense, and also write a short description. It is desirable to specify what items will be included in this account type (e.g., In the transportation account type, it could be included taxi fee, bus fee, or other transportation expenses, so type those items to classify easily). Note that you can also arrange these account types in a specific order through the filter button according to your preference.

3. Transaction Method List tab

• The “Transaction Method List” tab is where you can manage the dropdown options that you see in the Transaction Method column in the Ledger tab. The methodology to edit and update the items replicates the logic of how the Account Type List tab works.

4. Monthly Summaries tab

• When a transaction is recorded on the “Ledger (All transactions)” tab, the record is automatically reflected in the “Monthly Summaries” tab. Here, you can customise the data to include more or different variables (click anywhere on the table and the pencil icon to edit). You can also filter data through the “Filters” function.
• For example:
  • If you want to see values of the whole year, not by each month, click the pencil icon, delete the original item in the column section, and then choose “Financial Year (Automatic)”. This will show you the values of the whole year. If you want to see the monthly values, delete the Financial Year (Automatic) item and choose the “Month (Automatic)” option.
  • If you want to see values made within 2021, click the “Add” button next to the “Filters” section, and choose “Financial Year (Automatic)”. Then, click the status dropdown and only leave the FY21 item, which will show the values made in 2021. If you want to delete this filter, you can go back to the “Financial Year (Automatic)” section and click “X” to delete it.

5. Annual Statement tab

• The “Annual Statement” allows you to have a summarised view of your annual revenue, expense, and net profit in a formatted way. This will be especially helpful for you to prepare for your annual audit.
• In the “Annual Statement” tab, you can change the value in cells C5 and D5 to automatically summarize a different financial year (PS! If you haven’t yet, please indicate your financial year in the “Company Inputs” tab). Typically, you’d want to see your two latest years summarized. By clicking on cell C5 and D5 you get a dropdown option for financial years. By default, the template includes the financial years of 2021, 2022, 2023, 2024, 2025 (FY21, FY22, FY23, FY24, FY25). If you need any older or years after 2025, you can simply add additional dropdown choices by naming them exactly in the same format as the others. Such as “FY26”.
• Note that this version of the template includes the account items of the transactions that are added as examples only. This means that if you are customising the template to include or remove Account Types, you need to manually add or remove the relevant types as a row item in Column A.
  • For example, let’s say you have a new “Expense – Warehouse” item on the “Account Type List” tab (which would then automatically appear as a dropdown choice that you can pick from on the “Ledger” tab). Then you should manually add this Account Type as a new row in this tab. As warehouse expense is part of operating expense, go to the last row of the operating expense, right-mouse click on the row number, and click “Insert 1 row below”. If the new column is created, write the account type name (”Expense – Warehouse”), in the exact same wording you used in the “Account Type List” tab, on Column A. Then on the empty cells on Column C and D of the same row, copy paste the formula that other cells of the same column has (e.g. “=sumifs(‘Ledger (All transactions)’!$I$2:$I,’Ledger (All transactions)’!$B$2:$B,$A20,’Ledger (All transactions)’!$H$2:$H,C$5)”. One last check for you is to make sure that the relevant Column C and D cells showing your annual “Gross Profit” reflect the change of the cell range, so that the range includes the new row that you created or removes the row that you deleted.

6. Company Inputs

• The “Company Inputs” tab will be used to let the system calculate financial years automatically. Your company’s financial year is what dictates the exact period covered in your annual financial statements, and the financial period may differ among companies, which is why you have to complete this section. You can choose the financial year period yourself. The most common is either Jan 1 – 31 Dec or April 1 – March 31”.
• By inputting this, you will easily get automatic real-time financial year overviews in the rest of the bookkeeping template (such as the tab “Annual Statement”) that helps you see and compare financial years – and it makes the job easier for a future auditor to assist.
• For example, if the financial period of your business is from January 1 to December 31, put 1, 1, 31, and 12 accordingly to make sure those four numbers represent the exact period of the financial year. For example:
  • If your start date is the 1st of April then your financial year for 2021 (FY21) would be the transactions occurring in the time period of 01.04.2021-31.03.2022.
  • If your start date is the 1st of January, then your financial year for 2021 (FY21) would be the transactions occurring in the time period of 01.01.2021-31.12.2021.

Relevant Templates

FSI has prepared for you the essential templates that facilitate your bookkeeping. Click the links below to check them out!

The post Bookkeeping Template for Small Businesses appeared first on Foundation for Shared Impact.

Introduction to Paypal

PayPal, one of the leading online payment service providers in the world, offers a convenient and quick solution to online payment both for the payers and the payees. If you run an e-commerce business or provide a service where you would want your customers to pay online (even donations), you should consider to offer Paypal as a payment option for their convenience.

PayPal and Stripe provide very similar services – read Payment Processing – Integrating Stripe with your website if you would like to know more about PayPal and how to integrate it with your website.

Note that PayPal charges commissions and fees per transaction, but here’s why you should still consider it:

• Your buyers may be existing account holders of PayPal, in which case the one-click payment process is much easier compared to cash or manual bank transfers (Do also note that PayPal offers an option for you to allow customers without PayPal accounts to make a purchase and pay through credit or debit card). Ease of making a payment is an important factor that encourages visitors to buy your product/service.
• You can easily manage invoicing, bills, and payment tracking via PayPal.
• There is no maintenance fee, you would pay the commissions and fees only when you get incoming payments from your buyers.
• PayPal makes it easy for international buyers to purchase your product/ services, compared to the traditional bank transfers which can be problematic for cross-regional transactions.

Setting Up Your Business Account

Before you can integrate PayPal into your WIX or WordPress website to allow your customers to pay through PayPal, you first need to set up your PayPal business account.

1. Go to Paypal and click Sign Up, and choose to set up a “Business Account”
2. Enter your business email account
3. Enter password for your new business account
4. Enter your business contacts and details
5. Select your business type and category to sign up.
6. You will receive an email from PayPal to complete setting up your account → Click ‘Get Started Now’

7. You will be taken to this page below → Click ‘Account setup’ → ‘Link your bank account’ to connect your business bank account with your Business PayPal account for transfers.

8. Once it’s done, you are all set now!

Integrate PayPal with Your Website

1. WordPress Website

Once you have a PayPal business account ready, it is quite straightforward to link it to your website. However, you need to have the WooCommerce plugin installed on your WordPress. The plugin is free, and easy to use.

Take 5 min to watch the video below to install the WooCommerce plugin, or follow our steps listed below.

1. Go to Dashboard of your WordPress Website → WooCommerce → Settings

2. Go to ‘Payments’ Tab

3. PayPal should already be there! Click ‘Set up’

4. Tick the ‘Enable PayPal Standard’ box → Enter your PayPal business account email

5. Scroll down and click ‘Save changes’ → and you are all set! Now customers will be able to pay with their PayPal account and payment will be transferred to your registered bank account through PayPal.

6. Here’s what your customers will be seeing after the set up is done.

Customise Your PayPal Button – WordPress

You can customise your PayPal button to receive donation (if you are a non-profit organisation) and also customise where you want to place the button on your website pages.

• Read more about setting up PayPal Donate button on WordPress here – https://www.wpbeginner.com/beginners-guide/how-to-add-a-paypal-donate-button-in-wordpress/
• Read more about adding PayPal buttons on your desired places on your WordPress website here – https://wordpress.com/support/paypal/

2. Wix Website

If your website is built on Wix, you can customise the PayPal interface for your customers. While it is very quite easy to enable PayPal on your Wix website, you should be subscribing to the paid plans on Wix to enable the function. Assuming so, below are the steps:

1. Go to Dashboard → [Finances] → [Payments] from your Wix Dashboard.

2. Click [Manage Payment Methods].

3. Click [Connect] next to PayPal → Enter your email address (for your PayPal Business Account).

4. You are all set! Now PayPal check out is available on your Wix Website.

Customise Your PayPal Button – Wix

Wix allows you to place a direct Paypal checkout button anywhere on your website, and you can also customise the button’s layout and design.

1. On your Wix Editors website → Click [Add Apps] on the toolbar on the left → Search for “PayPal Button” → Click on PayPal Button

2. Click on [Add to Site], and you should now see a “Buy Now” PayPal button that you can move around to locate it wherever you want on the page.

3. If you click on [Settings] above the button, you will be able to choose from the different Button Types.

4. Choose your desired Button Type, go to [settings] tab right next to the [Template] tab → Click [Connect Payment Accounts] → Enter your PayPal Business Account email, and click [Done].

5. From the [Product] tab, you can set a fixed amount for your product/service/donation.
6. You can also customise the button’s design in the [Design] tab. There are several themes you can choose from or you can scroll down to fully customise it yourself in the [Button Design].

Allow Your Customers To Pay Through PayPal Without a PayPal Account

Note that PayPal also allows customers that do not have a PayPal account to make online purchases via PayPal, with their credit or debit card instead. Follow below steps to enable this option.

1. Go to your PayPal dashboard (your Business Account) → Click on the settings icon at the top right

2. Click ‘Selling tools’

3. Click ‘Update’, next to ‘Website preferences’

4. Scroll down to find ‘PayPal account optional’ → Tick “On”!

5. Now your customers without PayPal account will be seeing the option to ‘Pay with Credit or Debit card’.

Manage Your Invoices and Payments with PayPal

Managing invoices, bills and tracking payments can be complicated and manual. If you use PayPal, you can streamline this process as all transactions will be recorded on PayPal.

PayPal offers a free invoicing service for Business Account holders – read more about how to use PayPal’s invoicing templates and to send out online invoices here: https://www.paypal.com/us/invoice/invoice-template-generator

If you want to see the invoices you issued in the past, click on [Invoicing] in Quick Links on your PayPal account, or click [Pay & Get Paid] tab at the top banner. Here you will see all the invoices you sent out with the invoice number, recipient name, payment status, and the amount.

Watch the short video below to learn how to create and send invoices to your clients.

Fees and Commissions (as of April 15th 2022)

PayPal charges both fixed fee and commissions for transactions. Rates vary depending on the type of transaction, but the fee is fixed at HK$2.35 for commercial transactions. Details are following:

Additional Readings:

• PayPal’s Resources pages for businesses – https://www.paypal.com/us/brc/

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Introduction to Stripe

Stripe is one of the most popularly used payment processing software along with PayPal. This guide explains why you should consider using Stripe as your payment gateway, and how to integrate Stripe checkout on your website (built on Wix/ WordPress).

Stripe is a payment gateway that allows your customers to safely and efficiently transfer funds from their credit cards or bank accounts. It provides both one-time and subscription-based payments. Stripe and PayPal provide very similar services – read the guide: Payment Processing – Integrating PayPal with Your Website if you would like to know more about PayPal and how to integrate it with your website.

Stripe as Your Payment Gateway

Stripe offers a comparatively more business-friendly experience to users, where:

1. The commission charged is lower than competitors such as Paypal.
2. Stripe provides analytical tools for your transactions, such as:
   1. Advanced search functions (by card number, amount, customer, date, payment status, etc.)
   2. Visualised summary of your sales records
   3. Invoices page to automatically issue and record invoices generated from online sales

Watch this introductory video if you want to know more about Stripe and how to make the best use of it!

Get Started with Stripe

Setting up your Stripe Account

1. Go to Stripe → Click on [Start Now]

2. Fill in the blanks to create your account.

3. You will be directed to your setup page, where you can verify your email.

4. Press [Start now] under ‘Activate your Stripe account’

5. In this section, you will be asked to provide details of your business and bank account.

6. Submit your application after you fill all the fields in → it should only take a few minutes for the application to be approved!

Integrate Stripe with Your Website

1. WordPress Website

Once you have a Stripe account ready, it is quite straightforward to link it to your website. However, you need to have the WooCommerce plugin installed on your WordPress. The plugin is free, and easy to use.

Take 5 min to watch the video below to install the WooCommerce plugin, or follow our steps listed below.

1. In your WordPress Dashboard, go to [Plugins] → Click on [Add New]

2. In the search bar on the top right, search “WooCommerce stripe” → Install the plugin called [WooCommerce Stripe Payment Gateway]

3. Once installed, you should be able to find WooCommerce in the [Plugins] tab in your dashboard → click on ‘Settings’ under [WooCommerce Stripe Gateway].

4. You will be taken to a page like below. Make sure you have the ‘Enable Stripe’ box ticked.

5. Now, open your Stripe dashboard → [Developers] tab from the toolbar on the left.

6. You will see several sub-tabs under the [Developers] tab → Click on [API keys].

7. Copy the ‘Publishable Key’ token and ‘Secret Key’ token and paste them on the WordPress dashboard, in the blue box shown below → Scroll down and click on ‘Save Changes’

8. Now, your buyers will be able to see the option to checkout using Stripe in their payment process.

2. Wix Website

Wix requires a premium hosting (paid plans) for you to receive payments on your website. Assuming you have subscribed to a paid plan, you can follow the steps below.

1. Go to Dashboard → [Finances] → [Payments]

2. Click on [Manage Payment Methods]

3. You will initially see two options only; PayPal and Manual Payments → Click on [See More Payment Options]

4. Scroll all the way down and click on [Third-Party Credit/Debit Card Providers].

5. Now you should be able to see Stripe → Click on [Connect].

6. Click sign in (with your stripe account, which you should already have now), and now it’s all set! Your customers will see a payment option for Stripe on the checkout page.

Fees and Commissions (as of April 23rd 2022)

Stripe’s pricing is straightforward and simple, where small businesses can opt in for the pay-as-you-go plan to pay a 3.4% commission on each card charge, as well as a HK$2.35 transaction fee per transaction. Stripe’s costs for Hong Kong-based merchants are in line with its pricing in Singapore and other Asian markets.

In comparison, PayPal charges you 3.9% commission on each charge on top of HK$2.35, and its rates can go higher depending on the type of transaction (see Payment Processing – Integrating PayPal with Your Website for more details).

Additional Readings

• For any guides and instructions for integrating Stripe with Wix, visit: support.wix.com
• For more information about invoicing the Stripe payments, visit: https://stripe.com/docs/invoicing/dashboard/manage-invoices

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What did you find helpful, or how can we improve? What other kinds of resources do you think we should be providing?

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Introduction to Annual Audit & Profit Tax

Any company incorporated in HK must undergo an annual audit and has the obligation to pay profits tax. As per the Hong Kong Companies Ordinance (Cap.622), (the “Companies Ordinance”), an incorporated company in Hong Kong must undergo an annual audit by a practicing CPA (Certified Public Accountant).

What is auditing?

Auditing is defined to be the activity where an independent examination of the financial information provided by any entity, whether profit-oriented or not, takes place.

Auditing can be classified into several kinds, regarding its different purpose, including performance audits, quality audits, project audits, etc.

Why do you need auditing?

• To fulfill your legal obligation to be audited on an annual basis.
• To have an unbiased view of the overall health of your company’s financial condition, or that of a specific project.
• In the case of listed companies, to comply with the applicable rules of the relevant stock exchange(s).

Who is a Certified Auditor?

The certified auditors in Hong Kong are Hong Kong Certified Public Accountants, or in short CPA. They have studied and passed the necessary examinations which equip them with the skills needed to carry out a meticulous review of your financial statements.

Audit Compliance in Hong Kong

As per the Companies Ordinance, all incorporated companies in Hong Kong must undergo an annual audit by a practicing CPA.

In Hong Kong, the profits and taxes payable to the government are all based on the reviewed and audited financial statements, which ensures compliance with relevant laws. This regulation minimises the possibility that companies falsely state their financial conditions, either with intention or by negligence, which leads to a wrongly assessed tax amount.

Private companies and listed companies in Hong Kong usually prepare their financial statements using Hong Kong Financial Reporting Standards or International Financial Reporting Standards and arrange for auditing by Hong Kong audit firms registered with the Hong Kong Institute of Certified Public Accountants using Hong Kong Standards on Auditing or International Standards on Auditing. 

For PRC-incorporated companies listed in Hong Kong, since December 2010, The Stock Exchange of Hong Kong Limited has moved to accept financial statements prepared under accounting standards in the PRC and audited by audit firms approved by the Ministry of Finance of China and the China Securities Regulatory Commission, using the PRC auditing standards.

What is Profits Tax Return (PTR)?

Profits Tax Return is a form required by tax compliance that every company should submit to IRD. The form files the assessable tax to the government based on the audited financial statements.

• A sample can be found here.

When is the Deadline?

The audited accounts are required to be submitted to the Inland Revenue Department together with your Profits Tax Return when this is due. Normally, you should be ready with your audited accounts at least one month before the Profits Tax Return (PTR) deadline to have some buffer of time.

PTR Calendar in Hong Kong

• The first PTR will be issued by IRD around 18 months after a new business is established. Thereafter, the PTR form will be issued at the beginning of April every year.
• Companies are normally required to file their profits tax within one month (i.e. April 30) from the issue.
• Upon application, the filing deadline for companies whose financial-yearend date falls on March 31, or December 31, can be extended. The following table summarises the extended deadlines.

• Block Extension Scheme for tax representatives
  • Tax representatives may duly apply for the extension of PTR deadline for their clients. The calendar for the scheme may vary slightly from year to year.
  • A 2021/22 PTR calendar is exemplified as follows.

Auditing Fees

In Hong Kong, an annual audit is normally charged from HK$3000 to HK$30000, according to the size and volume of the company’s accounts and transactions in question.

How to Find a Certified Auditor

You can visit the website of Hong Kong Institute of Certified Public Accountants and search from the directory of certified CPAs.

Documents Needed for Auditing

For a smooth auditing process, you need an organised library of the below:

• All financial statements and management accounts
• All sales invoices, consulting service invoices, and contracts
• All purchases invoices and subcontractor’s invoices
• Receipts for all expenses
• All bank statements
• All merchant account statements
• All other relevant documents

This means that it is extremely important that you manage your business’s bookkeeping and accounting process continuously, rather than postponing the homework near your audit deadline. We recommend you review and reconcile your bookkeeping records at least on a monthly basis.

The Auditing Process

A standard auditing process can be summarised as follows:

1. A company submits all relevant documents (general ledger and the supporting documents such as files of invoices, receipts, payslips etc.) to the authorised auditor
2. The auditor first grabs some understanding of the business through the main statements and the industry commonplace.
3. After having an overall understanding of the business, the auditor begins with the large transactions to see whether there are irregularities.
4. After investigating the main accounts, the auditor continues to go through other statements to verify the details, such as invoices and bank statements.
5. After a thorough screening of the accounts and statements, the auditor gives his/her opinions on the company’s book.
6. The auditor writes an audit report with regard to the company’s specific fiscal year, computes the tax payable, and completes the tax filings correspondingly.

The auditor’s report will contain the auditor’s opinion on the historical financial statements during the agreed audit period. There are four types of an auditor’s opinion:

• Clean Opinion / Unmodified Opinion: A clean opinion is also known as an unmodified opinion, indicating that the auditor has concluded that the information in the financial statements is free from material misstatement. The auditor may add a paragraph of “emphasis of matter” to draw the reader’s attention to a significant matter in the financial statements of which the readers should be aware.
• Qualified Opinion: A qualified opinion refers to a clean opinion subject to one or more exceptions. Those exceptions may indicate that the auditor does not have enough evidence to conclude on information in the financial statements about a particular matter or matters, or information in the financial statements about a particular matter or matters is not free from material misstatement. Such exceptions are limited to specific account balances, transactions or disclosures.
• Adverse Opinion: An adverse opinion indicates that the auditor has concluded that there are material and pervasive misstatements of the information in the financial statements that undermine the reliability of the financial statements as a whole. 

Disclaimer of Opinion: A disclaimer of opinion means that the auditor is unable to form a conclusion because the auditor is unable to obtain enough evidence about whether there are misstatements of information about matters in the financial statements that are potentially material and pervasive, which in other words indicate that the financial statements may not be, or are not, free from material and pervasive misstatements.

After Audits

Approval and Presentation of the Financial Statements

Under section 436 of the Companies Ordinance, the auditor’s report shall be attached to the financial statements of the Company. According to section 387 of the Companies Ordinance, the statement of financial position that forms part of the financial statements must be (1) approved and signed by the directors of the company and (2) laid before the company’s general meetings or sent, circulated, published to the shareholders of the company. Failure to do so would subject the company to an offence and a fine at level 4 (currently at HK$25,000, as set out in Schedule 8 to the Criminal Procedure Ordinance (Cap. 221)). 

Filing of the Financial Statements with the IRD as part of the PTR

After the auditor finishes the audit report and the tax form, they will be submitted to the Inland Revenue Department (IRD) together with Profits Tax Return (PTR). After due review of the audit report, IRD will notify the company of the assessable tax amount and the payment schedule.

It is highly recommended to plan your next auditing ahead of time so that sufficient time is left for auditors to perform the reviewing processes and complete the tax filings.

Maintaining a Record of the Financial StatementsIn accordance with sections 373-378 of the Companies Ordinance, a company is Hong Kong is required to keep the accounting records at its registered office or any other place that its directors think fit , for 7 years after the end of the financial year to which the last entry made relates. On application by a director of a company, the court may by order authorise a person to inspect the company’s accounting records on the director’s behalf.

Appendix I: Exemption of Profits Tax Auditing requirements

1. Your company is deemed “dormant” (”Having no relevant accounting transactions”).
2. Your company is incorporated in a jurisdiction where an audit is not legally obligated.
3. Your company is a branch of foreign company and audit for worldwide accounts has been made by your headquarter. You should submit the returns with the following information:
   • Place where your company is incorporated
   • Whether under that jurisdiction, an audit for worldwide accounts is a statutory requirement
   • Whether the audit has been conducted
   • A summary of the financial and accounting records maintained by the Hong Kong branch
   • Certified copy of the financial and accounting records.

Additional Readings:

• AUDITING IN HONG KONG by startupregistry.hk
• Tax Filing Guide by startupregistry.hk

Disclaimer:

This guide has been drafted with the support of White & Case. The information provided on this website does not, and is not intended to, constitute legal advice or as a substitute for the particularized advice of your own counsel. All information, content, and materials available on this website are for general informational purposes only, and they may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites, and such links are only for the convenience of the reader, user or browser. These links to third-party websites or information are not intended as, and should not be interpreted by you as, constituting or implying our endorsement, sponsorship, or recommendation of the third party information, products, or services found there.

Last updated on 27 Sep 2022

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Why do I need a bank account?

When you start a business, opening a bank account should be one of the first housekeeping tasks for you to manage all transactions for your business purpose, from receiving payments from your customers, paying salary and business expenses, tax, etc. Read this guide to learn all you need to know about opening up your bank account in Hong Kong.

Choose Your Bank and Plan

Different banks offer different corporate banking plans. Choose the bank and plan that best fits your business. Note that in Appendix I of this guide, we’ve listed some major banks in Hong Kong where you may open your first account.

You may refer to the website of the Hong Kong Monetary Authorities for more information on banking information, including contacts, and account specifics. Find here the link to Hong Kong Monetary Authority – Contact Details of Banks.

We recommend you research and compare the amount of minimum deposit required by each bank, as well as any one-off account opening fee and/or monthly fee to maintain the account before you make a decision. The initial deposit amount may vary from HKD 5,000 to HKD 50,000, and the processing fee to open a bank account may also vary quite broadly from HKD 500 to HKD 10,000. Read this guide by Startup Registry where the relevant fees are compared.

Prepare The Documents

After choosing the banks and plans, you may proceed to prepare relevant documents for the account opening. Depending on the nature of a company, banks require different documents. Here we have listed the common documents that are normally required, for your handy reference. PLEASE DO REFER TO THE OFFICIAL WEBSITE FOR YOUR CORRESPONDING BANK FOR MORE DETAILS.

Click to read the documents required for Corporate Customers

• Corporate identification documents, for example:
  • Certificate of incorporation
  • Report from a company registry
  • Certificate of Incumbency;
  • Certificate of good standing;
  • Record of registration;
  • Partnership agreement of deed; or
  • Constitutional document
  • Information of the address of the registered office and principal place of business (if different from the address of registered office)
• Information of the beneficial owner(s), for example:
  • Identification document of the beneficial owner(s)
  • Details of the ownership and control structure of the company
• Purpose and intended nature of the account, for example:
  • Purpose of the account
  • Expected account activities
  • Business nature and mode of operation
• Information of the person acting on behalf of the customer, for example:
  • Identification document of the person acting on behalf of the customer
  • Authorisation document

Why So Many Documents?

These documents are required by the Hong Kong Monetary Authority, the bank regulator in HK, as before opening accounts for any individual or corporate clients, banks should undertake Customer Due Diligence (CDD) to fully understand their backgrounds. This also helps banks to provide appropriate services to their customers.

Unreasonable Request

Though there are CDD requirements, you should also beware of the possible abuse of banks’ power. Banks are prohibited to collect information that is disproportionate to the needs of risk assessment. These unreasonable requests include:

• requiring all directors and beneficial owners of an overseas corporate to be present at account opening;
• mandating that all documents of an overseas corporate are certified by a certifier in Hong Kong;
• requesting a start-up to provide the same degree of detail on its track record, business plan, and revenue projections as a long-established company;
• expecting a Hong Kong business registration certificate for all applicants or evidence of a Hong Kong office for all overseas corporates, irrespective of business model or mode of operation;
• requiring voluminous or very detailed information on the source of wealth sometimes going back decades irrespective of the risks presented by the relationship or type of service offered (e.g. MPF account, basic banking services with small balances) which is difficult or impossible for the customer to provide;
• rejecting account opening based on unreasonably high benchmarks such as expected or actual sales turnover;
• requiring a large amount of deposit; and/or
• making the purchase of insurance products or wealth management investment as the precondition of account opening.

Submit Your Application

• Depending on your preference and the bank’s availability, submit an online application to upload all required documents or book an offline appointment to process.
• If you are visiting the bank in person, please make sure you’re taking the required documents and initial deposit, if any. Should there be any extra documents required, the bank will inform you.
• Normally, it should take around 2-4 weeks to complete the account opening process.

Account Opening – Successful!

Congratulations on successfully opening your first bank account. With your business bank account, you can start dealing with your cash flows. Don’t forget to think about bookkeeping from Day 1 !

What To Do If The Application Fails

1. We suggest that you contact the bank directly to ask for the reasons and appeal for a review.
   • Normally, banks should provide a reasonable ground for any rejections, and there is a revision mechanism in place for unsuccessful applications.
2. Should the requirements or any other processes appear unsuitable or you deem the application not able to move forward, you can consider going to another bank to open an account.
3. You may want to consider letting the Hong Kong Monetary Authority (HKMA) know of any unfavorable rejection by sending an email to accountopening@hkma.gov.hk. However, note that this is unlikely to impact the status of your application immediately.

Appendix I: Introduction to Some Major Banks in Hong Kong

• HSBC – The Hong Kong and Shanghai Bank Corporation Limited(HSBC) is one of the largest bank in Hong Kong and is also one of the three note-issuing banks. As a global giant in banking, an account at HSBC would always be a good choice whether your business focus is local or global. HSBC offers three banking solutions for corporate users, namely the Sprint account, Business Direct account, and BusinessVantage account. Click the link to learn more.
• Standard Chartered – Standard Chartered, a Britain-headquartered multinational bank, is among the three note-issuing banks in Hong Kong. With numerous branches and ATMs in Hong Kong, It would also be a good choice to open an account at Standard Chartered if your business has a wide global reach.
• Citibank (Hong Kong) – Citi, the first foreign bank in Hong Kong, is also another leading bank, which provides comprehensive banking services for corporate users. Specially, Citi provides banking services targeting SMEs, which can be good choice if you have just kick started your business.
• Bank of China (Hong Kong) – Bank of China (Hong Kong) is one of the three note-issuing banks in Hong Kong, and the sole clearing bank for Renminbi (RMB) business in Hong Kong. It is a locally incorporated bank with close relations with its parent, Bank of China. If your business involves transactions in RMB in large volume, a BOCHK account is highly recommended.
• Bank of East Asia – Bank of East Asia (BEA), headquartered in Central, Hong Kong, is the largest independent local bank in Hong Kong. If your business targets local market, BEA would be a good choice for you.
• Hang Seng Bank – Hang Seng Bank is the second largest local bank in Hong Kong. If your business is primarily focusing on Hong Kong market, consider opening an account at Hang Seng Bank to enjoy the its comprehensive services and good discounts.

Additional Readings:

• Opening a Corporate Bank Account in Hong Kong by Hawksford: Opening a Corporate Bank Account in Hong Kong

• How to open a business bank account by Startupregistry: https://statrys.com/blog/opening-a-business-bank-account-in-hong-kong

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