Accounting software in Kenya: eTIMS, VAT and choosing the right tool

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Choosing accounting software in Kenya now depends on more than bookkeeping features. Since KRA rolled out eTIMS, businesses need invoices that are transmitted to KRA, and many expenses can only be claimed with valid eTIMS invoices from suppliers. Good software also needs to handle VAT or turnover tax, reconcile M-Pesa and bank transactions, and connect to payroll. This guide explains what Kenyan businesses need from accounting software, the main options, costs, and a checklist for getting set up correctly.

Why accounting software matters more in Kenya now

Kenyan tax administration has become increasingly digital. KRA's electronic Tax Invoice Management System (eTIMS) requires businesses to generate and transmit tax invoices electronically, and the Finance Acts have tied expense deductions to valid eTIMS invoices. Bank and mobile money data is also increasingly used in KRA compliance checks. A business that keeps records in spreadsheets and paper invoices risks both missed deductions and assessments it cannot challenge.

Accounting software that integrates with eTIMS, reconciles bank and M-Pesa transactions and produces VAT and income tax figures makes compliance part of daily work rather than a scramble at deadlines.

What eTIMS requires

eTIMS applies to businesses that supply goods or services, whether or not they are VAT-registered. Each sales invoice must be generated through an eTIMS solution and transmitted to KRA, receiving a unique control number. eTIMS solutions include KRA's own options, such as the online portal and the eTIMS Lite app for small businesses, and system-to-system integrations where your accounting or point-of-sale software connects directly to KRA.

Our guide on how to register for eTIMS walks through registration. When choosing software, check whether it has a certified eTIMS integration or works through a third-party integrator, and what that costs.

VAT and turnover tax

Businesses with taxable supplies of KES 5 million or more in a twelve-month period must register for VAT, charged at a standard rate of 16% on most goods and services, with some zero-rated and exempt supplies. VAT returns are filed monthly on iTax by the 20th of the following month.

Smaller resident businesses with turnover between KES 1 million and KES 25 million may fall under turnover tax at 1.5% of gross sales, filed monthly, unless they opt out or are excluded. Your software should support the regime you are in. Our Kenya VAT calculator helps with quick VAT sums.

M-Pesa and bank reconciliation

Many Kenyan businesses receive most payments through M-Pesa paybill or till numbers. Reconciling those receipts with invoices is one of the most time-consuming bookkeeping tasks. Look for software that can import M-Pesa statements or connect through an integration, match payments to invoices automatically, and handle transaction charges correctly.

The same applies to bank feeds: direct connections or easy statement imports from Kenyan banks save hours each month. If you also take card or online payments, see accepting online payments in Kenya.

Payroll and statutory deductions

If you have employees, your accounting software needs payroll figures: salaries, PAYE, SHIF, Housing Levy, NSSF and NITA, with employer contributions recorded as expenses and liabilities. Some accounting tools include Kenyan payroll; others integrate with separate payroll software. Either way, check that the payroll side follows the latest rules; see statutory deductions in Kenya and PAYE in Kenya.

Compare payroll options in the Kenya payroll software ranking.

Features to look for

• eTIMS integration for sales invoices and credit notes.
• VAT or turnover tax reports matching iTax returns.
• Withholding tax and withholding VAT tracking, if your customers or you are withholding agents.
• M-Pesa and bank reconciliation.
• Invoicing and quotes with KES and foreign currencies.
• Expense tracking with supplier eTIMS invoice capture.
• Inventory, if you sell goods.
• Payroll or a payroll integration.
• Multi-user access for your accountant.
• Reports: profit and loss, balance sheet, cash flow.

The main options

Kenyan businesses typically choose among international cloud accounting tools with local tax settings and eTIMS integrations, and locally built software designed around Kenyan tax and M-Pesa. Compare options in our Kenya accounting software guide and see Zoho Books pricing in Kenya. For broader comparisons of international tools, see the accounting software ranking, QuickBooks vs Wave and Wave vs Zoho Invoice.

International tools often have stronger features and integrations; local tools often have better M-Pesa and eTIMS support and local-currency pricing. The best choice depends on which gaps you can live with.

Cloud vs desktop

Cloud accounting software runs in a browser, updates automatically, allows your accountant to log in remotely, and usually connects more easily to eTIMS, banks and other apps. Desktop software runs on one computer, can work offline and may have a one-off licence cost, but updates and backups are your responsibility and remote access is harder.

For most small businesses, cloud software is the better default. If internet reliability is a concern, choose a tool with a good mobile app and offline invoicing, or keep a backup connection.

What accounting software costs in Kenya

Costs range from free plans for very small businesses to monthly subscriptions priced in shillings or dollars, often by number of users or features. Add the cost of an eTIMS integration if it is not included, payroll modules, and any setup help from an accountant. International tools priced in dollars are affected by exchange rates and card fees.

For a small service business, expect to pay a modest monthly subscription plus your accountant's fees. A business with inventory, several users and payroll will pay more. Compare total annual cost, not only the entry plan, and check our software price tracker for recent changes.

Setting up accounting software correctly

1. Choose your tax settings: VAT at 16% with correct codes for zero-rated and exempt items, or turnover tax.
2. Set up your chart of accounts, ideally with your accountant.
3. Connect bank accounts and M-Pesa statements.
4. Connect eTIMS and test invoice transmission.
5. Enter opening balances: bank, receivables, payables, inventory.
6. Add customers, suppliers, and products or services.
7. Set up invoice templates with your KRA PIN and required details.
8. Connect payroll or set up payroll journals.

Capturing supplier eTIMS invoices

To claim expenses and input VAT, you increasingly need valid eTIMS invoices from suppliers. Make it a habit to request eTIMS invoices for every purchase, check that the supplier's PIN and invoice details are correct, and record the invoice in your software. Some tools can validate invoices against KRA records. Keep a list of regular suppliers who do not issue eTIMS invoices and consider alternatives, since their invoices may not be deductible.

Monthly bookkeeping routine

• Issue all sales invoices through eTIMS as sales happen.
• Record supplier invoices weekly.
• Reconcile bank and M-Pesa weekly or monthly.
• Run payroll and record payroll journals.
• Review VAT or turnover tax figures and file by the deadline.
• Review profit and loss and cash flow.

Our cash runway calculator and profit margin calculator help turn the numbers into decisions.

Working with an accountant

Even with good software, most small businesses benefit from an accountant for setup, annual accounts, income tax returns and advice. Give your accountant access to the software rather than sending spreadsheets. Agree who does what: you might issue invoices and record expenses, while the accountant reconciles, reviews VAT and prepares year-end accounts. Clear roles prevent both duplication and gaps.

Foreign-owned businesses in Kenya

If your company is based abroad and sells to Kenyan customers or has a Kenyan branch, the rules depend on your structure. Non-resident businesses providing digital services to Kenyan consumers may have VAT obligations, and a local entity has full Kenyan tax duties. If you only employ in Kenya without an entity, an employer of record handles payroll compliance; see how to hire employees in Kenya.

Common mistakes

• Issuing invoices outside eTIMS.
• Accepting supplier invoices without eTIMS details, then losing the deduction.
• Not reconciling M-Pesa receipts, so sales and cash do not match.
• Wrong VAT codes for zero-rated and exempt items.
• Payroll figures not posted to the books.
• Missing the 20th-of-the-month VAT deadline.

Example: a small consultancy's setup

A three-person consultancy in Nairobi invoices clients for project work, some VAT-registered and some not. They chose cloud accounting software with an eTIMS integration, so every invoice is transmitted to KRA when issued. Client payments arrive by bank transfer and M-Pesa paybill; both statements are imported weekly and matched to invoices. Supplier invoices for office rent, internet and software subscriptions are recorded with their eTIMS details where available.

Payroll runs in separate Kenyan payroll software, and the monthly payroll journal is imported into the accounting system. Each month, the VAT report is reviewed and filed on iTax by the 20th. Their accountant logs in quarterly to review and at year end to prepare accounts. The whole routine takes a few hours a month.

Example: a retail shop with inventory

A shop selling household goods has a point-of-sale system at the counter and an online WhatsApp ordering channel. Sales from the till must be fiscalised through eTIMS, so the POS system needs an eTIMS integration or must feed sales into accounting software that has one. Inventory is tracked in the POS, with stock values summarised in the accounting system monthly. M-Pesa till payments are reconciled daily.

For businesses like this, the POS choice matters as much as the accounting software. See how to choose a POS system and the POS ranking, and check eTIMS support before buying.

Withholding taxes

Some Kenyan businesses act as withholding agents, deducting withholding income tax on certain payments, such as professional fees, and in some cases withholding VAT. If your clients withhold tax from your invoices, you receive less cash than the invoice total but get a withholding certificate you can use as a credit. Your software should record the withheld amounts against the invoice so receivables are not overstated, and track certificates for your income tax return. If you are a withholding agent, you must remit the withheld tax to KRA on time.

Data security and backups

Your accounting data contains customer, supplier and financial information. Use strong unique passwords stored in a password manager, turn on two-factor authentication, give each person their own login with the minimum access needed, and remove access when people leave. Cloud providers back up data, but export key reports periodically as part of your own backup routine; see the 3-2-1 backup rule.

Questions to ask vendors

• Is your eTIMS integration certified by KRA, and is it included in the price?
• Can the software import M-Pesa statements or connect to M-Pesa directly?
• Which Kenyan banks have direct feeds?
• Does it support turnover tax as well as VAT?
• Can it record withholding tax and withholding VAT certificates?
• Is Kenyan payroll included, or which payroll tools does it integrate with?
• What happens to my data if I cancel?
• Is support available in Kenyan business hours?

Ask for a demo using your own transactions, such as an M-Pesa statement and a typical invoice, before you commit.

Questions