How to catch up on late books before a KRA review, audit or bank loan

First, don't panic and don't guess

Late books are common, especially in busy small businesses. The danger is not the delay itself but filing returns from estimates, which creates new errors. The aim is to rebuild from evidence.

Step 1: Collect the evidence

• Bank statements and M-Pesa statements for every account, for the full period.
• Sales records, invoices, receipt books and till or POS reports.
• Supplier invoices, delivery notes and expense receipts.
• Payroll records and proof of PAYE, NSSF and SHIF payments.
• Your iTax payment and return history, so you know what KRA already holds.

Step 2: Pick the starting point

Find the last month when the books were correct and agreed to the bank. Start there. If there is none, start from the beginning of the period you need, such as the last tax year.

Step 3: Set up proper software

Use cloud accounting such as Zoho Books, Xero or QuickBooks, with a clean chart of accounts and your opening balances entered. Connect bank feeds where possible, because they cut typing and errors.

Step 4: Rebuild month by month

1. Enter bank and M-Pesa transactions and match them to invoices and receipts.
2. Reconcile the bank balance at the end of every month before moving on.
3. Record sales, purchases, payroll and loans.
4. List debtors and creditors and confirm them against customer and supplier statements.
5. Count stock and agree it to your records.

Step 5: Deal with tax

• Compare your rebuilt figures with returns already filed on iTax.
• File any missing returns and correct wrong ones as early as you can. Penalties and interest keep growing while a return stays unfiled.
• Check supplier invoices for eTIMS. From the 2026 year of income, expenses without them can be disallowed.

Step 6: Review and produce statements

Read the profit and loss and the balance sheet for anything odd: a negative cash balance, stock that is too high, expenses that look too low. Then prepare financial statements and the schedules an auditor or bank asks for.

Step 7: Stop it happening again

• Reconcile the bank every month.
• Keep every receipt and voucher filed against the transaction.
• Issue invoices through eTIMS.
• Review a one-page summary of cash, debtors and tax due every month.

Put a figure on the cost of delay with the penalty calculator and overdue invoices calculator, check supplier invoices against the eTIMS guide, and see the Rescue package if you want it done for you.

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