Companies in Kenya must keep accounting records that show their transactions and financial position, and prepare annual financial statements under the Companies Act 2015. Tax rules require records to be kept for five years, so a consistent monthly bookkeeping routine matters more than any particular software.
The Companies Act 2015 requires a company to keep accounting records sufficient to show and explain its transactions and to disclose its financial position with reasonable accuracy. Directors answer for this duty. In practice that means a general ledger, sales and purchase records, bank and M-Pesa statements and supporting invoices.
Tax law sets its own retention rule: records supporting tax returns are to be kept for five years. KRA can ask for invoices, contracts, bank statements and payroll records from that period, and gaps lead to estimated assessments that are hard to contest.
Keep originals or faithful electronic copies in a form that can be produced on request. A scanned invoice that is legible and linked to the transaction is generally more useful than a shoebox of faded thermal receipts that nobody can search.
Directors cannot simply delegate the duty away. Even when an accounting firm keeps the books, the board remains responsible for ensuring adequate records exist and for approving the annual statements, so review the monthly pack and ask questions rather than signing whatever is presented at year end.
Kenyan companies prepare financial statements in line with International Financial Reporting Standards, and many small companies use the IFRS for SMEs version. The Institute of Certified Public Accountants of Kenya (ICPAK) regulates the profession, so statements are usually prepared or reviewed by a CPA registered with it.
Statements include a statement of financial position, a statement of profit or loss and notes. The Companies Act 2015 sets out which companies must be audited and which small companies may be exempt, and the thresholds come with conditions, so confirm your status with your accountant before assuming an exemption.
The statements support more than compliance. Banks use them for credit decisions, investors for due diligence and KRA for the corporation tax computation. A set that is finalised late or contains unexplained balances will hold up each of those processes.
Agree the scope in writing: bookkeeping, VAT returns, payroll, annual accounts, tax computation and corporation tax filing are separate services, and mixing them up leaves gaps. Specify who collects documents, by which day each month, and who holds the iTax credentials.
Share documents in an organised way. A monthly folder with sales invoices, purchase invoices, bank and M-Pesa statements and payroll summary cuts the accountant's time dramatically. Firms that spend hours chasing receipts will price that time into the fee.
Ask for a monthly management pack even if you are small: a profit and loss, a list of debtors and creditors and a bank reconciliation. Seeing numbers every month helps you catch problems like unpaid invoices long before the year-end audit does.
Agree how corrections are handled. When you discover a mis-posted invoice, tell your accountant and let them reverse and repost, so that the audit trail shows the original entry, the reversal and the correction. Overwriting figures in a shared spreadsheet destroys exactly the history that auditors want to see.
A chart of accounts translates daily transactions into reportable categories. Keep it as simple as your business allows, with separate accounts for output VAT, input VAT, PAYE, NSSF, SHIF and housing levy liabilities, because these balances should be reconcilable to filings.
Code transactions consistently. If the same expense lands in three different accounts across the year, comparisons become meaningless and the tax computation requires manual adjustment. Give staff a one-page list of common expenses and where to post them.
Treat fixed assets, stock and loans with extra care. They generate year-end adjustments such as depreciation, stock counts and interest, and they are where audits and tax authorities tend to look for errors.
Review dormant accounts once a year. Closing accounts that are no longer used and merging near-duplicates keeps reports readable, and a short coding guide pinned beside the accounts system reduces the chance that a new employee creates yet another expense category.
Reconcile every bank and M-Pesa account to the statement, list debtors and creditors with ageing, count stock, confirm fixed asset additions and disposals and agree payroll liabilities to the PAYE, NSSF, SHIF and housing levy payments made. Doing this in the first fortnight after year end keeps the audit short.
Gather agreements that affect the accounts: loan contracts, leases, supplier terms and any related-party arrangements. Auditors ask about them, and contracts are the evidence for balances that cannot be proven from a bank statement alone.
Agree timing for corporation tax. Companies file their return and pay tax in line with the rules for their year end, and the deadlines relate to the financial year, so your accountant should give you a date in writing at the start of the year, not in the last week.
Agree the cut-off rules for the last week of the year. Invoices raised on 31 December for work completed in January, or deliveries received without an invoice, create the largest year-end disputes, and a one-page policy on accruals prevents argument with the auditors.
4invoices.net archives issued PDF invoices, which gives you a clean record of sales. 4softerp.net keeps multi-company financial records and is useful when you manage a few entities from one login. Neither is a Kenyan statutory accounting package, and neither files with KRA.
Ask your accounting firm which format it wants and whether it will work in your system or its own. Some firms prefer to keep the ledger themselves and receive documents from you, while others review your ledger remotely.
Whatever you choose, document your procedures. A one-page description of who records what and by which day makes onboarding a new bookkeeper simple and lets directors fulfil their legal duty to keep adequate records.
Source documents are scattered across e-mail and WhatsApp, and the accounting firm spends hours collecting them before each deadline.
Collect source documents in one place: issued invoices sit in the 4invoices.net archive and 4softerp.net keeps multi-company financial records. Share access with your accounting firm by agreement; 4b2b does not auto-categorise documents.
The chart of accounts does not reflect Kenya-specific categories, making year-end adjustments time-consuming.
Ask your accounting firm which chart of accounts and export format it needs. 4b2b does not provide a pre-mapped Kenyan chart of accounts.
Records are kept for the audit year only, and older invoices are deleted.
Retain supporting records for at least the period tax law requires, in your own archive. 4b2b does not manage retention schedules.
Tax rules require records that support returns to be kept for five years, and company law requires adequate accounting records throughout the life of the company. Keep invoices, bank statements, contracts and payroll files for the longer of the two periods, and store electronic copies somewhere you can retrieve them on request.
It depends. The Companies Act 2015 contains audit rules and an exemption for certain small companies, subject to conditions on size and status. Do not assume you qualify. Ask your accountant to confirm in writing each year, because shareholders, banks and funders may demand audited statements regardless of the legal minimum.
Companies generally prepare statements under International Financial Reporting Standards, and many small and medium companies use IFRS for SMEs. ICPAK regulates accountants. Your accounting firm will choose the framework appropriate to your size and reporting needs, so agree it at the start of the engagement. Banks and investors may specify the framework they want, so ask before the year-end work starts.
Yes, for simple businesses, provided records are complete, accurate and supported by documents. Many owners record monthly transactions and let an accountant handle year-end statements and tax computations. Review your books regularly with a professional so that errors in VAT, payroll or categorisation are caught early. Budget for at least an annual review, because small errors compound over several years.
No. 4softerp.net keeps multi-company financial records, but it does not provide a Kenyan chart of accounts, prepare statutory financial statements or file with KRA. Your accountant prepares the accounts, and you can use the records as a source alongside bank statements and invoices. If you need a specific file format, ask your accountant what they accept before you start.
This page is informational. Confirm requirements with the competent authority; 4b2b tools cover general invoicing and records only.
