Bookkeeping for Kenyan SMEs: Records KRA Expects, eTIMS and How to Get P&L and VAT Right (2026)

For years, many Kenyan small businesses kept books in a notebook, an M-Pesa statement and a shoebox of receipts, and sorted it out when the accountant called. That approach is getting expensive. KRA now receives sales data in real time, and only expenses supported by eTIMS records are safe to claim. Good bookkeeping has moved from a nice-to-have to a tax-protection tool.

What records a Kenyan business must keep

The law requires you to keep records sufficient to work out your tax liability. In practice, that means:

• Sales records: invoices, receipts and a daily sales log (turnover tax filers in particular need daily sales records to support the monthly return).
• Purchase and expense records: supplier invoices and receipts for everything you claim.
• Bank and M-Pesa statements: the trail that proves the numbers are real.
• Payroll records: payslips and statutory remittances for every employee.
• Loan agreements and asset purchases, where they apply.

Keep these for at least five years from the end of the year they relate to, and longer if there is a dispute or audit open. Failing to keep proper records is an offence, and weak records also make it easy for KRA to raise an estimated assessment that you then have to disprove.

Why eTIMS changes the game

Businesses are now expected to generate and transmit invoices and transactions to KRA electronically through eTIMS, which has free solutions for small businesses. Two consequences matter for your books:

• Your sales are visible to KRA. If the sales you declare do not match what KRA already holds, that mismatch can trigger queries, audits and penalties.
• Expenses need eTIMS support. An expense without a valid eTIMS record may not be deductible, which means a higher tax bill. Ask suppliers for an eTIMS invoice and file it with the transaction.

VAT: know where you stand

At the time of writing, businesses with annual taxable turnover above KES 5 million must register for VAT, charge 16% on taxable supplies and file monthly. KRA has proposed in its medium-term revenue strategy to remove the threshold so that every business registers, but this is a proposal that still needs approval, not law. Check with KRA before you act on it. Either way, you want a system that can produce a VAT return without a weekend of rework.

The record once, report everywhere approach

Double-entry books scare most business owners, but the idea you need is simple: record each transaction once, in one place, with a category. Everything else is derived from those entries:

• a trial balance that proves your books add up,
• a profit and loss statement that shows if you are actually making money,
• a balance sheet for banks, SACCOs and investors,
• a VAT return ready to file, and
• a dashboard so you can see where the month is heading.

A cash-based bookkeeping workbook built for Kenya

The Karatasi SME Bookkeeping Workbook does exactly this in Excel. It is a complete cash-based workbook for a Kenyan business: you enter each transaction once, and it produces your Trial Balance, P&L, Balance Sheet, VAT Return and Dashboard automatically. There is no subscription and no software to learn beyond Excel.

See the Karatasi SME Bookkeeping Workbook

If you have staff, add the Kenyan Payroll Management System so your PAYE, NSSF, SHA and Housing Levy are calculated correctly every month. You can also read our guide on how to run payroll in Kenya in Excel.

This article is general information, not tax advice. Rules change through Finance Acts and KRA notices, so confirm current requirements with KRA or a qualified accountant.