May 24, 2024

What The E-Invoice System Holds For Your Small Business


The Kenya Revenue Authority (KRA) is intensifying efforts to bring small businesses into electronic payments (e-invoicing) with the launch of a new scheme.

This initiative comes after failing to meet their initial targets, with only a handful of expected businesses adopting the Tax Invoice Management System (TIMS) introduced in 2022.

The initial implementation of TIMS aimed to bring 915,000 transactions onto the e-invoicing system. However, by the end of 2023, only 202,291 businesses had been registered. 

In response, KRA has unveiled a new option for customers to create invoices for smaller suppliers. The move is intended to ease the transition for small and medium-sized enterprises (MSEs).

This is because they may not have the resources or technology to implement a complete e-invoicing solution on their own.

For instance, a small bakery supplying bread to a local grocery store may not have the resources to invest in a dedicated e-invoicing software.

Under the new plan, the grocery store, already equipped with an e-invoicing solution, can generate the invoice on behalf of the bakery when purchasing bread. This also ensures the invoice meets all the necessary tax requirements.

The introduction of TIMS marked a significant change from the previous Electronic Tax Register (ETR) system. ETR relied on dedicated machines to process invoices, limiting costs to small businesses.

TIMS, on the other hand, offers a more flexible approach to software solutions that are accessible through computers, mobile devices and even web browsers.

There are various eTIMS solutions available to cater to different business needs:

  • eTIMS Single Paypoint (Windows): Ideal for businesses with a single location and cashier, this software includes a stock management module.
  • eTIMS Multi-Paypoint (Windows): Designed for businesses with multiple locations and cash points, this option also features stock management functionalities.
  • eTIMS Mobile App (Android): This app caters to service-based businesses with an annual turnover below KShs 5 million and is specifically optimized for mobile operations.
  • eTIMS Online Portal: This web-based solution is suitable for service providers with limited invoice volume (under 10 invoices per month).
  • System-to-System Integration: Businesses can integrate their existing billing systems with the KRA eTIMS platform for a seamless workflow.

The benefits of e-invoicing extend far beyond just compliance. Here’s how your businesses can gain from adopting eTIMS:

  • Enhanced Compliance: Real-time invoice validation ensures only accurate invoices are issued, minimizing the risk of errors and penalties.
  • Improved Efficiency: Automation streamlines invoice creation, transmission, and authentication, freeing up valuable time and resources for core business activities.
  • Simplified Sales Auditing: Continuous, real-time recording of transactions enables easier and faster sales audits, allowing businesses to identify discrepancies and rectify them promptly.
  • Reduced Filing Costs: Automatic record-keeping eliminates the need for physical storage and simplifies return filing with pre-populated VAT returns, reducing administrative burdens and associated costs.
  • Increased Customer Satisfaction: Faster invoice delivery and a more convenient experience for customers lead to higher customer satisfaction and potentially improved brand loyalty.

The shift to e-invoicing is in line with the broader objective of digital transformation in Kenya. Research shows that small businesses that embrace digital tools experience significant improvements in revenue growth – up to 26%.

READ ALSO: Kenya’s Next Moves After the World Bank Reduced Planned Support

Digitization empowers businesses by automating repetitive tasks, streamlining business processes and reducing manual labour. This frees up valuable time for strategic planning and business improvement. 

Additionally, digital tools reduce human error in data entry and budgeting, leading to greater accuracy and improved decision-making.  They further help businesses reduce administrative costs associated with paper-based systems, including printing, warehousing and mail receiving. 

Businesses can also use digital channels such as social media and email marketing to better communicate and engage with customers, building stronger relationships and potentially increasing sales.