Good records are the cheapest protection a small business has. They let you file correct returns, claim every expense you are entitled to, and answer a KRA query in minutes rather than weeks. The law expects you to keep the records that support your returns, normally for at least five years.

What to keep

Sales records - Copies of every invoice or receipt issued, including eTIMS invoices (see eTIMS e-invoicing explained) - Daily sales summaries and till or M-Pesa statements

Purchase and expense records - Supplier invoices that show your business PIN - Receipts for fuel, transport, utilities and rent - Contracts and delivery notes for larger purchases

Banking and cash - Bank and M-Pesa statements, and your reconciliations. See bank reconciliation step by step - Cashbook entries for money in and out

Payroll - Payslips, P9 forms and proof of PAYE, NSSF, SHIF and Housing Levy payments

Tax filing - Every return filed, with the acknowledgement receipt - Payment slips and proof of payment

A simple system that works

  1. Capture daily. Record every sale and payment in a cashbook. The free simple cashbook keeps a running balance and a monthly summary.
  2. File documents weekly. Photograph paper receipts and save them in a folder named by month.
  3. Reconcile monthly. Match the cashbook against the bank statement, using the bank reconciliation statement.
  4. Check what you must file. The tax records checklist and document log lists every document by tax type and records where each one is stored.
  5. Log every payment. Use the tax payments log so you can prove each payment later.

How long to keep records

Keep tax records for at least five years after the end of the year they relate to, and longer if there is a dispute or an audit in progress. Records of fixed assets should be kept for as long as you own the asset and for five years after you sell it; the fixed asset register tracks each asset and its history. Payroll records and contracts should be kept for the period required by employment law as well.

Digital or paper?

Electronic records are acceptable if they are complete, readable and can be produced when asked. Back them up in two places, for example a cloud folder and an external drive. If you scan paper receipts, keep the paper too until you are sure the scan is clear; thermal receipts fade.

Records and your tax bill

Records are not only for compliance. Deductible expenses are only as good as the proof behind them, and under the eTIMS rules a purchase without a proper invoice may be disallowed. Good records also make it easier to choose between tax regimes, such as turnover tax and normal income tax.

Start small

If your records are a mess today, do not try to fix the past in one weekend. Start with this month. Set up a cashbook, a folder for receipts and a calendar of dates, and add one step each month.

Retention rules can change. Confirm the current requirement with KRA or a registered professional.

Common questions

How long must I keep business records? At least five years from the end of the year to which they relate. Records for assets and long-term contracts should be kept longer.

Can I keep records electronically? Yes, if they are complete, readable and available when KRA asks. Scan paper documents, name files consistently and keep a backup.

What records does KRA look at first? Sales records, bank and M-Pesa statements, purchase invoices (especially eTIMS invoices), payroll records and the returns you filed.