Key takeaways
- An SME does not need to open every account from the start. Begin with an operating account, a tax reserve account and, once you receive advance payments, a deposit account.
- A deposit remains a liability to the customer and should not be used as general working capital.
- Separate accounts are only useful if you transfer money in the proper order and reconcile consistently.
Common problems
Many SME owners use a single account to receive customer payments, pay suppliers, salaries and tax, and make personal withdrawals. The result is:
- You do not know your true profit
- There is no cash when tax falls due
- Customer deposits are used as working capital and cannot be refunded
- A machine breaks down and there is no reserve
- The bank sees no financial discipline
Four benefits
- Discipline: every sum of money has a clear purpose
- Transparency: auditors, banks and co-investors can check the accounts easily
- Compliance: some transactions must be kept separate under contracts or regulations
- Risk Mitigation: limits the impact when one account runs into problems
Seven accounts to know
1. Operating account
Day-to-day receipts and payments. A typical balance is 3–6 months of expenses. If monthly expenses are THB 500,000, you should hold THB 1.5–3 million. Any excess above the target should be swept in the order you have set.
2. Customer deposit account
Keep advance payments separate from working capital. This suits contractors, made-to-order businesses, tutoring schools, fitness centres, tours, events and real estate businesses.
For condominiums, escrow under Thai law is voluntary, but contracts or bank conditions may require funds to be kept separate. Check the actual contract and the laws specific to your business.
- Do not use it to pay salaries or dividends
- Do not use it to buy new assets before the work is delivered
- Keep enough money to refund customers if they cancel under the agreed terms
Transfer to the operating account in line with work actually delivered, e.g. 30% delivered, 30% transferred
3. CAPEX / Project account
Receives loans or capital increases for investment and pays out according to plan. Banks usually disburse against progress, supported by documents.
4. Debt service reserve account
Set aside 3–6 months of loan instalments. For example, with instalments of THB 200,000 per month, you should hold THB 600,000–1,200,000. The reserved money should be kept in a suitable liquid instrument.
5. Tax reserve account
- VAT: calculated from output VAT less input VAT; file PP 30 on time
- WHT: based on the amounts withheld; PND 3 and 53
- CIT: at the SME rate if you qualify, or the standard 20% rate; file PND 51 and 50
- SBT of 3.3% for businesses that meet the criteria
Transferring a fixed percentage of revenue, such as 7–10%, can serve as a starting rule. However, adjust it each month to match your actual tax liability, especially if the business has large input VAT or is not VAT-registered.
6. Asset replacement reserve account
Set aside about 1–4% of revenue. For example, a restaurant with monthly revenue of THB 1 million would set aside THB 10,000–40,000 per month. Examples of use: replacing furniture every 5 years, kitchen equipment every 7 years and renovating every 10 years.
7. Foreign currency account
Receive and pay in foreign currencies without converting each time. Use a forward contract close to the payment date, and do not hold foreign currency to speculate if there is no real expense.
Cash Flow Waterfall
- Revenue enters the operating account
- Transfer to the tax reserve
- Top up the debt reserve account if it is below the threshold
- Transfer to the asset replacement reserve
- Remaining balance in the operating account meets the target
- Invest any surplus in the short term or pay dividends according to policy
The key is to allocate money for known obligations before using it elsewhere.
Getting started by business size
| Stage | Example annual revenue | Recommended accounts |
|---|---|---|
| Get Started | Less than THB 10 million | Operating, tax reserve, and deposit account if applicable |
| Growth | THB 10–50 million | Add a debt reserve and an asset replacement reserve |
| Expansion | More than THB 50 million | Add CAPEX and FCD accounts when they are actually used |
Common mistakes
- Opening accounts but not using them: set up auto-transfers or a weekly discipline
- Using the company account as a personal account: withdrawals should go through salary, dividends or documented transactions
- Combining several businesses in one account: separate by legal entity and business
- Keeping everything with one bank: consider 2–3 banks
- No co-signatory: accounts holding large sums should require at least 2 signatories
Conclusion
Separating accounts is a basic financial discipline that shows you how much money you can actually use, prepares you for tax payments and keeps you ready for audit. Start with the tax reserve account and monthly reconciliation, then add other accounts as the business needs them.