By Derek Mutiso
Smart Accounting Can Future-Proof Kenyan Businesses
In recent decades, the global economic climate has morphed into a complex, fast-paced environment marked by digital disruption, geopolitical uncertainty, and rapid shifts in consumer behavior. With it, the traditional “back-office” accountant role is evolving into that of a front-line strategist.
For many small and medium-sized enterprises (SMEs) in Kenya, accountants are becoming strategic advisors – guiding businesses through turbulence, building resilience, and propelling growth. With SMEs contributing over 30% to Kenya’s GDP and employing over 80% of the working population, their survival and success are national priorities. Accountants must now lead from the front.
The Business Terrain A Snapshot of 2025
Although Kenya’s economy is structurally sound, it is still faced with some challenges. The shilling has held up nicely over the past few months, but Interest rates are still high, and SMEs are constantly burdened by the cost of compliance, especially with everchanging tax laws. Inflationary pressures have elevated the cost of goods and disrupted cash flow cycles, especially for small businesses with limited capital buffers.
In April 2025, Kenya’s Consumer Price Index (CPI) indicated an annual inflation rate of 4.1%. Compared to the previous month, when the annual inflation rate was 3.5%, this is an increase. The overall price level in February 2025 was 3.5% more than it was in February 2024, according to the Kenya National Bureau of Statistics’ (KNBS) most recent data.
Data from Kenya Private Sector Alliance (KEPSA), Kenya Association of Manufacturers (KAM), and MSME Authority reports show that SMEs in agriculture, retail, hospitality, and transport have reported declining margins, increased debt defaults, and capital flight. It is within this context that accountants must assume a more proactive and strategic role.
Responding to Key Challenges
1. Cash Flow Management
“Revenue is vanity, profit is sanity, but cash is king.”
The precise origin of this statement is unknown, but it gained popularity during the 1987 worldwide stock market meltdown when it was said by former Volvo CEO, Pehr G. Gyllenhammar. He noted that businesses with cash reserves fared considerably better than those with inadequate cash management.
It’s no secret that Cash flow – not profit – is king for SMEs. Accountants are best placed to introduce rolling cash flow forecasts, develop dashboards, and ensure working capital is optimized. Tools such as scenario planning and stress-testing can prepare SMEs for supply chain disruptions or sudden policy shifts. By modeling various risk scenarios, accountants help businesses assess the financial impact of potential shocks and develop contingency plans that safeguard operational continuity and cash flow stability.
2. Managing Evolving Regulatory Demands
Tax reforms are meant to enhance revenue collection and formalize the economy. However, some of them have inadvertently increased the operational and financial burden on SMEs. With frequent changes in tax laws (e.g., digital service tax, turnover tax reforms), accountants play a big role in keeping businesses compliant and avoiding penalties.
But beyond this, tax accountants must now advise on strategic tax planning- choose the right structures, taking advantage of allowable deductions, alongside managing VAT and PAYE obligations efficiently.
3. Building Investment Readiness
Startups and SMEs in the growth stage need capital to expand – but many lack proper books, financial models, or even business plans. Accountants can bridge this gap by producing audit-ready financials, valuation models, and investor-friendly dashboards -to help SMEs obtain funding from VCs, banks, or development partners.
4. Crisis Advisory and Business Continuity Planning
Accountants are increasingly stepping into the role of crisis advisors, helping SMEs prepare for and respond to operational disruptions. From fire and data breaches to the sudden loss of key clients or suppliers, these risks can destabilize businesses overnight. Accountants can lead the development of robust Business Continuity Plans (BCPs) by identifying vulnerabilities, quantifying potential losses, and designing financial safeguards. What was once the domain of external consultants is now a critical part of the accountant’s evolving strategic toolkit.
Case Study: How Financial Literacy Can Improve Investor Readiness for Kenyan SMEs
In early 2025, the Kenya Private Sector Alliance (KEPSA), through its Jiinue Growth Program, conducted a series of Investor Readiness Training Sessions in Nairobi and Kikuyu. The sessions targeted small and medium-sized enterprises (SMEs) that had promising business models but lacked the financial structure required to attract funding. A total of 79 SMEs participated.
Among other things, many of these businesses struggled with:
- Poor bookkeeping and irregular financial records.
- Inability to produce basic financial reports like cash flow statements and income projections.
- Unawareness of valuation principles and how to present their business to potential investors.
- Fear of financial scrutiny during due diligence processes.
The Strategic Accounting Intervention program focused on:
1. Basic Accounting and Recordkeeping Skills
Many SMEs operate informally, relying on handwritten notebooks or incomplete spreadsheets. The program introduced participants to structured accounting practices, teaching them how to record income, categorize expenses, and monitor gross profit margins consistently. Entrepreneurs were also guided on using basic accounting software and ledgers to track their financial activities accurately. This foundational skill is essential not only for internal decision-making but also for creating a credible financial narrative when engaging external stakeholders.
2. Financial Modeling and Forecasting
To secure funding, SMEs must demonstrate how their businesses will grow and generate returns. Participants were introduced to the principles of financial modeling, including revenue projection, cost estimation, and cash flow forecasting. The training emphasized how to develop models grounded in realistic assumptions—such as market demand, seasonal trends, and input costs. SMEs learned to simulate various business scenarios (e.g., best case, conservative case) to help investors understand the risks and opportunities embedded in their operations.
3. Pitch Preparation with a Financial Focus
One of the common pain points for SMEs is the inability to clearly articulate their financial performance and funding needs during investor pitches. The program equipped entrepreneurs with the language, tools, and confidence to present their numbers persuasively. This included understanding key financial ratios (e.g., net profit margin, return on investment), preparing summary financial dashboards, and answering potential investor questions on revenue drivers, cost structures, and breakeven points.
4. Compliance Literacy and Tax Awareness
Many SMEs unknowingly jeopardize investment opportunities due to poor tax compliance or undocumented liabilities. The training demystified regulatory expectations – especially around KRA obligations such as VAT returns, turnover tax, and the new electronic invoicing system (e-TIMS). SMEs were guided on the importance of clean tax records, timely remittances, and how to align their accounting systems to meet legal standards. This not only prepares businesses for investor due diligence but also fosters long-term sustainability and credibility.
Results and Impact:
After receiving the training, many of the SMEs
- Reported increased confidence in engaging with banks and investors.
- Produced cleaner, compliant books, which became assets in pitching for funding.
- Began preparing for due diligence audits, proactively identifying and resolving red flags.
With the right guidance and tools, SMEs can make viable pitches and present themselves as credible investment opportunities.
Source: KEPSA Empowers 79 SMEs Through Investor Readiness Training – KEPSA News, Jan 2025
As Kenya’s financial and investment landscape continues to evolve, the ability of SMEs to attract and retain capital will increasingly depend on the quality of their financial systems, reporting standards, and strategic readiness. Accountants, particularly those trained in valuation, compliance, and business advisory, are well-positioned to support this transition.
Today’s accountants need to adopt forward-looking roles- in order to enable SMES to navigate risk, comply with regulatory expectations, and engage confidently with investors. Their contribution is vital in converting financial data into insight, structure, and ultimately, opportunity.
In an environment where funding decisions are made on the basis of trust, clarity, and long-term viability, accountants have the potential to serve as key enablers of enterprise growth. Their evolving mandate is clear: to support capital access, build resilience, and contribute to a more transparent, investment-ready SME sector in Kenya.
References
Financial Sector Deepening Kenya. (2024). Transforming the MSME industry in Kenya: An outlook report.
Kenya Association of Manufacturers. (2025). KAM March 2025 sectors report.
Kenya Association of Manufacturers. (2025). Manufacturing priority agenda (MPA) 2025.
Kenya National Bureau of Statistics. (2025, April). Consumer price indices and inflation rates – April 2025.
Kenya Private Sector Alliance. (2025, January). KEPSA empowers 79 SMEs through investor readiness training in Nairobi and Kikuyu.
Kenya Private Sector Alliance. (n.d.). Jiinue Growth Program (JGP).
The author is a business writer and project coordinator, Omeriye Foundation
