The Multi-Currency Challenge for Kenyan Importers
Import businesses in Kenya purchase goods in US dollars, Chinese yuan, euros and other foreign currencies while selling in Kenyan shillings. This creates a persistent accounting challenge: the cost of goods changes between the time you place an order and the time you clear them from the port. Exchange rate movements can turn a profitable shipment into a loss-making one overnight.
Most Kenyan importers track their purchases using spreadsheets that quickly become unwieldy as transaction volumes grow. A proper multi-currency accounting system records each transaction at both the foreign currency amount and the KES equivalent, tracks exchange rate gains and losses, and gives you a true picture of your import costs.
Exchange Rate Tracking and Conversion
The Central Bank of Kenya publishes daily exchange rates, but the rates you actually get from your bank or forex bureau will differ. Your accounting system should allow you to record the actual rate applied to each transaction rather than relying on a standard daily rate. This precision matters because cumulative rounding errors on hundreds of transactions can distort your cost data significantly.
Unrealised exchange gains and losses on outstanding supplier balances must also be tracked. If you owe a Chinese supplier USD 50,000 and the shilling weakens by 5 percent before you pay, your effective cost has increased. Monthly revaluation of foreign currency balances keeps your financial statements accurate and helps you time your forex purchases.
| Exchange Rate Scenario | Impact on Importer | Accounting Action |
|---|---|---|
| KES strengthens after purchase order | Lower cost in KES, forex gain | Record realised gain at payment date |
| KES weakens after purchase order | Higher cost in KES, forex loss | Record realised loss at payment date |
| Outstanding supplier balance at month end | Potential unrealised gain or loss | Revalue balance at closing rate |
| Advance payment to supplier | Rate locked at payment date | Use actual rate for cost allocation |
Customs Duty, Fees and Landed Cost Calculation
The true cost of imported goods extends well beyond the supplier invoice. Import duty, excise duty, VAT, IDF fees, railway development levy and clearing agent charges all contribute to the landed cost. Kenyan importers who price their goods based only on the purchase price consistently underestimate their true costs and erode their margins.
Landed cost calculation allocates all import-related expenses across the individual items in a shipment, usually proportional to value, weight or volume. Your system should let you add customs entries, freight charges and handling fees to a shipment and automatically distribute these costs to each product line. This gives you an accurate per-unit cost for inventory valuation and pricing decisions.
Always include all charges in your landed cost: CIF value, import duty, excise duty, IDF levy, railway development levy, port charges, transport to warehouse and clearing agent fees. Omitting any component leads to underpricing.
Inventory Management for Imported Goods
Import businesses face long lead times between ordering and receiving stock, often 30 to 90 days depending on the origin country and shipping method. Your inventory system needs to track goods at every stage: ordered, in transit, at port, in customs clearance and received in warehouse. This pipeline visibility prevents over-ordering when stock is on the water but not yet visible in your warehouse.
Batch tracking is essential for importers because each shipment may have a different landed cost. Selling from the wrong batch at the wrong price can destroy margins. A system that maintains cost per batch and applies the correct cost of goods sold when you make a sale ensures your profit calculations are accurate.
Supplier Management and Payment Scheduling
Managing relationships with international suppliers requires tracking payment terms, advance payment obligations and shipping schedules. Many Chinese and Indian suppliers require a 30 percent advance before production begins and the balance before shipment. Your system should schedule these payments, convert them to KES at projected rates and factor them into your cash flow forecast.
Maintaining a supplier ledger in the original currency and in KES gives you clarity on outstanding obligations. When multiple orders overlap, this dual-currency view helps you prioritize payments and take advantage of favourable exchange rates when they arise.
KRA Compliance for Import Businesses
Import businesses interact with KRA at multiple points: customs declarations, import VAT, income tax and monthly VAT returns. Import VAT paid at the port is an input credit that offsets your output VAT on local sales. However, claiming this credit requires proper documentation linking the customs entry to your VAT return.
Your accounting system should store customs entry numbers against purchase records and automatically include import VAT in your monthly VAT return. This ensures you claim all eligible input credits and reduces the risk of queries during a KRA audit. Transfer pricing documentation may also be required if you import from related parties.
Setting Up Your Import Business Management System
An effective import management system connects your purchasing, inventory, accounting and compliance functions into a single workflow. The key is ensuring that data flows from the purchase order through customs clearance to inventory receipt and finally to sales, without manual re-entry at each stage.
- Enable multi-currency support with automatic and manual exchange rate options
- Configure landed cost templates for common import routes and product categories
- Set up pipeline inventory stages to track goods from order to warehouse
- Link customs entry documents to purchase records for VAT input credit claims
- Implement batch costing to maintain accurate margins across shipments
- Create supplier payment schedules aligned with your cash flow forecast
