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Real life accounting, Nairobi (2026)

28/11/2023

KRA E-TIMS - The white elephant in the room.

Background info. In August 2021, KRA launched TIMS, all VAT registered taxpayers were required to comply by acquiring the upgraded ETR devices. This allowed near real time transmission of electronic invoices to KRA. The deadline was 30th Nov 2022.
Among the issues that arose, was the cost of acquiring the gadgets and integration issues.
To sort this, KRA upgraded to an online software version, ETIMS in Feb 2023. Taxpayers with ERP's can use the VCU invoicing system which facilitates integration. It also has a supply chain module for tracking inventory transactions.

👨‍⚖️ Legal framework; The VAT Act of 2013. The ETR regulations were released in 2020. It took 10 years to implement!

Moving forward;
💡 Did you know, NO expenses will be allowable for tax purposes (Annual Income tax) as at Jan 2024, if the invoices/expense receipts are not passed through E-tims. This means ALL expenses even small petty cash expenses like transport via boda boda etc. There are No exemptions!

🚑 Brace to pay higher corporation taxes in 2024 if you are dealing with informal suppliers who are giving receipts and invoices that are not passed through E tims or not giving receipts at all.

🧠 For any business owner, you are well placed if you deal with formal suppliers who have E-tims registered. It applies to all taxpayers even if you are not VAT registered. You should register on Etims but as non-VAT taxpayer.

👉 The law is not changing, what is there is that all non-vatable businesses (businesses not registered for VAT) or those registered under the turnover tax, will be required to issue invoices that are E-tims compliant. It does not mean the invoice will have Vat, No; it only means that it will have passed through the government system of VAT tax compliance i.e ETIMS.

Bigger Picture

The move is to help the government increase its tax to GDP ratio from the current 15.2% by 4% as per the OECD, The average for 33 African countries within the Revenue Statistics in Africa 2023 publication has remained unchanged over the same period and was 15.6% in 2021. I hate to compare but in Europe the tax to GDP ratio is at 41.7%. Talk about debt in African countries.

We are not being overtaxed; we simply were not paying equal share to the government for the people gaining from the economy. That's where the pain is emanating from.

21/11/2023

Dear non-accountants' business owners,

For Cash's sake.

When your profit and loss account is constant period after period.

😱 If Accounts receivable is growing - It's not good for your cash, rethink if your credit controller is worth it.

😎 If your accounts receivable is growing - Your accountant payable should get a raise.

😣 If your inventory value count and value is growing - You need an urgent meeting with your procurement team.

.

21/11/2023

Kenya is supposedly on the brink of debt (Both Local & Foreign) default.

The facts;

1. Public debt surged during an infrastructure construction drive under Ruto's predecessor Uhuru Kenyatta.

2. Target collections 2023/2024 fiscal year is 1 trillion Kenya shillings.

3. The Eurobond for 2022/2023 was cancelled in Favour for cheaper sources of finance i.e. the world bank loan and borrowing was reduced from 720.1 billion to 580.9 billion.

4.Funding for the Kenya government will shift from debt to taxes for the next 5 years. Be prepared to pay to save the economy.

5. Infrastructure drive in the past 10 years pushed the debt level of the country to the current 9.145 trillion shillings against the ceiling of 10 trillion as per the PFM. We relied more on expensive loans like Eurobond instead of the traditional cheaper loans from IMF and world bank. Some of these projects include SGR, roads, expansion of sea and airport operations.

6. Most of our problems stem from high tax Government expenditure & poor tax compliance among the citizenries.

7. The country's optimum debt portfolio can only be achieved in the year 2026 just before the General elections.

8. Current debt to GDP ratio is 60% according to Fitch ratings it's expected to plateau at 70% by end of 2023, the goal according to the medium-term debt management strategy is to it to 54% a mixture of both domestic and external debt.

9. Economic growth since the pandemic is as follows 2020- 0.3%(Pandemic), 2021- 7.5%, 2022- 5.5% (Russian Ukraine war), 2023 - 6.1% (projection).

In conclusion, the government need to balance and cap both external and domestic borrowing by reducing fiscal deficits & reducing expenditure and maximizing tax collection by increasing the tax base. This can be achieved by putting a stop to imports of majority of the commodities, encouraging a thriving domestic export market, hedging the risk of the USD fluctuations, increasing employment opportunities through exporting labor, providing better yields for government bonds, improving social security & equitable distribution of income.

20/11/2023

''They grow the fruit but eat the rind''

19/11/2023

Are you wondering what KPIs or cost saving initiatives to employ while managing inventory? Below are some you can consider.

➡ Just in time Inventory system - Minimize storage costs, implement on demand ordering, optimize order quantities using actual consumption.

➡ Vendor managed Inventory - Ensure timely deliveries, shift inventory responsibility to suppliers to reduce holding costs, increase collaboration with suppliers.

➡ Consolidate Suppliers - Reduce the number of suppliers, leverage on bulk purchase discounts, negotiate on favorable terms with key suppliers.

➡ Offload fixed assets - Free up capital through leasing.

➡ Technology adoption - Automate routine tasks, automate supplier management & cost analysis.

➡ Vertical mergers - Consider acquiring key suppliers to reduce costs and enhance control.

➡ Product simplification - Streamline the product portfolio to reduce complexity, have a more focused product range.

15/11/2023

Christmas on a budget

Christmas can be one of the happiest times of the year for many families, but it can also be one of the most expensive. With a rise in the price of everything compared to last year, it looks like you might have to part with more this year when shopping for gifts, food and Christmas decorations.

In Kenya due to inflation and according to world remit, you are expected to spend 7.73% more compared to 2022. This is not the worst compared to other countries like Nigeria 23.71%, Zimbabwe 21.65%, Rwanda 7.93%. Some countries like Uganda compared to 2022 are at 3.26%, South Africa - 1.87% and Cameroon -5.43%

Some ways to beat this include.

1. Take advantage of sales in your favorite shopping stores.

2. Get organized and put it down on a list.

3. Stick to a budget to track your spending.

4. Beat the Christmas rush and get their early.

5. Shop around before making a decision.

15/11/2023

Free cashflow (FCF) for private equity owned businesses.

This is a crucial metric for private equity owned businesses for the following reasons.

1. Valuation - FCF is an input while calculating discounted cashflows (DCF). This is determining the present value of future cashflows.

2. Return on investments (ROI) - The main purpose of a private equity owned business is to recoup wit interest on its initial and subsequent investment. FCF represents the funds available for distribution to equity holders.

3. Debt repayment capabilities - FCF is crucial in debt servicing & repayments. If a company does not free cashflow then it's probability of defaulting is high.

4. Strategic growth initiatives - The key point here is flexibility of funds to pursue growth opportunities without straining the business.

5. Operational efficiency KPI - There's no better indicator of the company's operational efficiency than FCF. This shows that the company is getting more than what it's using in terms of cash.

6. Dividends payments - To be able to exit the business on an attractive front, the potential investors will want to see that the company is able to pay out dividends. This increases the attractiveness of the business. FCF is essential in performing this task.

7. Leverage in negotiations - While engaging vendors, lenders, potential buyers, FCF gives leverage in these negotiations.

8. Risk management tool - A business with FCF is well buffered against macro-economic factors that might affect the business. They have an ability to weather these storms without compromising operations.

In summary, free cash flow is a critical metric for private equity-owned businesses, influencing valuation, investment decisions, financial structure, and the ability to pursue strategic initiatives. Monitoring and managing free cash flow effectively are key aspects of successful private equity investments.

29/03/2022

Cashflow is king
Credit is queen

Real life accounting

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