By Derek Mutiso
Propelling Brilliant Ideas to the Capital Markets
Starting a business is exciting until reality sets in. You begin by researching the market, sizing up competitors, and perfecting your product. At first, handling the books seems manageable. Why pay an accountant when you can track every shilling yourself?
But growth changes everything. As sales pick up, so do the invoices, payroll headaches, and tax deadlines. What started as a simple spreadsheet soon spiralled into a maze of compliance filings, investor reports, and cash flow puzzles. Even the most organised founders get overwhelmed. That’s when many realise: good accounting isn’t just about recording numbers—it’s about building a financial system that scales with your ambitions.
This becomes especially clear when businesses aim for major milestones, like going public. Take Kenya’s packaging industry, a sector worth nearly KSh 66 billion. Companies that succeed at scale don’t just rely on demand; they invest in bulletproof financial foundations early.
Consider a Nairobi-based packaging firm that recently filed for an IPO after 15 years in business. Their journey wasn’t just about making more boxes or hiring staff. Behind the scenes, accountants played a critical role—from structuring early financial records to preparing audit-ready statements for regulators and investors. The leap to a stock exchange listing would’ve been impossible without that discipline.
The NSE’s push to onboard more SMEs highlights this perfectly. Investors and regulators don’t just want revenue—they want transparency. And that starts with numbers you can trust.
The lesson? Waiting until you’re drowning in paperwork is a mistake. Whether you’re a startup or a growing SME, professional accounting does three key things:
- Prevents costly errors – Missed tax filings or messy books can derail funding talks.
- Unlocks growth – Clean financials help secure loans, attract investors, and win big contracts.
- Saves your sanity – Freeing you up to focus on what moves the needle.
High Startup Failure Rates in Kenya
Startup failure rates in Kenya are high, mirroring global trends where many new businesses collapse within their first five years. Key reasons include:
- Funding shortages and poor cash flow management are leading to early closures.
- Weak market research results in products that don’t meet customer needs.
- Poor planning and leadership, with many founders lacking business management skills.
- Intense competition is forcing startups to adapt quickly to survive.
- External challenges include economic shifts, regulations, and infrastructure gaps.
Without addressing these issues, many Kenyan startups will continue to struggle.
What steps should you take?
1. Conceptual Stage: Laying the Financial Groundwork
At this initial stage, the entrepreneur may still be juggling different ideas. They may have a core business in mind, but it could also be done with some advice. The accountant’s role at this point is often underestimated, yet it is crucial.
- How to register the business: An experienced accountant with solid knowledge of corporate law can advise the budding entrepreneur on which entity to register, a sole proprietorship, partnership, or limited company. This decision will be based on liability, tax implications, and the entrepreneur’s capital.
- Budget modelling: Bookkeepers help to determine the cost estimates for setting up the venture, developing products, marketing, and other operating expenses.
- Registration support: We guide the entrepreneur through the KRA pin application for the business and registration for SHIF and SHA.
These bits and scraps ensure the business is financially compliant from day one.
2. Minimum Viable Product (MVP) and Validation Stage: Establishing Simple Systems
Once an MVP is launched and early customers are engaged, accountants introduce basic systems to track performance:
- Bookkeeping Setup: Excel templates, QuickBooks, or Xero systems are introduced to track expenses, revenue, and cash flow.
- Cost Tracking: Categorising startup costs (R&D, marketing, legal) and distinguishing capital vs. operating expenses.
- Revenue Validation: Helping founders analyse whether their revenue model (subscriptions, pay-per-use, ads) is sustainable.
This financial structure gives founders insight into profitability and sets the stage for real growth.
3. Traction Stage: Financial Discipline for Growth
As user numbers grow and sales increase, financial discipline becomes essential. Accountants now take on a broader advisory role:
- Monthly Financial Reporting: Producing income statements, cash flow reports, and balance sheets for internal use and investor communication.
- Pricing Strategy: Advising on cost-plus vs. value-based pricing and analysing gross margins.
- Tax Planning: Determining when VAT registration is required and ensuring compliance with PAYE, withholding tax, and statutory deductions.
- Payroll Systems: Setting up compliant payroll systems with NHIF/NSSF integration and KRA remittance.
In its FY 2023/24 review, Safaricom’s finance function, led by CFO Dilip Pal, established a rigorous monthly reporting cadence—producing consolidated income statements, balance sheets and cash-flow forecasts complete with variance analyses against budget and prior periods.
These management packs, shared with the executive team and investors, enabled near–real-time identification of performance drivers and emerging risks across Safaricom’s Kenyan and Ethiopian operations. Coupled with other financial tools, these measures underpinned an 11.7 % increase in service revenue to KSh 329.8 billion and a 10.8 % rise in net income to KSh 69.8 billion during the financial year.
In this stage, startups often fail or succeed, and accountants are key to preventing financial leakage.
4. Scale-Up Stage: Readiness for Investment
At this point, startups often seek external capital to scale. Accountants are instrumental in preparing for and managing this phase:
- Financial Modelling: Developing 3–5-year projections with sensitivity analysis.
- Investor Due Diligence: Ensuring books are clean, taxes are filed, and all vendor/customer contracts are in order.
- Audit Readiness: Supporting statutory or investor-mandated audits.
- Cost Optimisation: Identifying areas to reduce burn rate without sacrificing growth.
With growing staff, multiple revenue streams, and operational complexity, accountants must advise on risk management and internal controls.
5. Maturity and Exit Stage: IPOs, Acquisitions, and Beyond
Equity Bank’s journey from a small building society to a leading regional bank hinged on meticulous financial preparation and disciplined governance. In the lead‐up to its July 19, 2006, Nairobi Securities Exchange listing, the finance team restated its 2003–2004 accounts from Kenyan GAAP to full IFRS, working closely with a Big Four auditor to adjust revenue recognition, fair‐value measurements, and loan‐loss provisions while expanding disclosures on risk management and related‐party transactions. This early adoption of international standards fulfilled NSE listing requirements and reassured investors with transparent, comparable financial statements.
Equity later cross-listed on the Uganda Securities Exchange in June 2009 (ticker EBL) and later on Rwanda’s bourse, widening its investor pool across East Africa.
Few startups reach this stage, but those that do require sophisticated financial leadership:
- IFRS Compliance: Ensuring all reporting aligns with international standards.
- Equity Management: Tracking shareholder transactions, cap tables, and stock option plans.
- Corporate Governance: Supporting board reporting and audit committee structures.
- Exit Strategy: Whether through IPO, merger, or acquisition, accountants play a pivotal role in valuation, tax structuring, and deal negotiation.
At this stage, the accountant is no longer just an advisor but part of the executive team.
The Accountant as an Embedded Growth Partner
By weaving accounting expertise into the very fabric of a young company, startups stand to gain way more than just number-crunching; they secure a strategic partner committed to their growth. An accountant does far more than balance books; they anticipate cash-flow challenges, translate financial data into actionable insights, and enable the cross-functional collaboration that supports sustainable growth.
This disciplined approach reduces operational risks, strengthens governance, and sends a powerful signal of credibility to future investors. Ultimately, the accountant steers the journey while the founder may chart the vision.
The author is a business writer and Project Coordinator for the Omeriye Foundation.
