29/08/2026
HOW STRUCTURE SHOOL AS AN ACCOUNTANT
An accountant just assumed office at ABC Primary and Junior School. The school has never been audited by a competent auditor before, therefore he is like the pioneer accountant. He has been instructed to organize the organize the accounting system.
What do you advise?
Below is my advise!!
1. Entity & governance
Common legal forms
• Private for‑profit: private limited company (Ltd). Subject to corporate tax and full tax compliance.
• Nonprofit/charitable: trust, society, or company limited by guarantee; may register with NGO Coordination Board if receiving foreign funds.
• Church-run schools may operate under the church body; governance documented by trustees.
• Fiscal year: align accounting year with the academic year for budgeting clarity. Typical options:
• July–June or Jan–Dec. If you receive government funding, check funder reporting periods. For tax filings, Kenyan companies often use December 31, but you can select another year-end if appropriate.
2. Accounting method & systems
• Use accrual basis accounting (recognize revenue/expenses in the period service is provided). Accrual gives accurate matching of tuition and school-year costs.
• Choose software: QuickBooks Online, Xero, or Sage Pastel . For small schools, QuickBooks/Xero with class/location for streams/campuses works well.
• Use classes/locations or dimensions to track: campus, grade level, program (daycare, after-school, boarding).
3. Kenyan tax & payroll considerations
• PAYE (Pay As You Earn): Withhold employee income tax monthly and remit to KRA. Ensure correct salary bands and PAYE table.
• NSSF (National Social Security Fund): Employer and employee contributions — follow current NSSF rules/tiers.
• SHIF Employer and employee contributions per SHIF schedule.
•Housing levy
• Withholding taxes: on certain services/consultancy where applicable.
• VAT: Tuition for basic education may be exempt/zero-rated — confirm with KRA or tax adviser. Other school activities (canteen sales, merchandise) may attract VAT.
• Corporate tax / Income tax: For for-profit schools pay corporation tax; for nonprofits, check tax-exempt status and annual filings (and if exempt, maintain strict records).
• Filing and compliance: monthly PAYE/NSSF/SHIF remittances; monthly or periodic KRA returns where applicable; annual income tax filing and statutory payroll returns.
• Grants / donor funds: document restrictions and reporting terms; if receiving foreign funds register with NGO Coordination Board if applicable.
4. Fund & program tracking
• If nonprofit or using restricted donations, use fund accounting or at minimum separate tracking (sub‑ledgers or dimensions).
• Track each donor/grant with: agreement, budget, allowable costs, reporting deadlines.
5. Policies & internal controls (priorities for a school)
• Segregation of duties: different persons for collecting fees, banking, and posting receipts/reconciliations.
• Fee collection controls: official receipts, cash count, bank deposit within 24–48 hours, daily cash summaries.
• Bank reconciliation: monthly, signed by preparer and reviewer (e.g., head of finance and an independent manager).
• Student ledger: maintain AR by student with payment plans; regular follow-up on overdue accounts and approval for scholarships.
• Procurement policy: purchase orders for goods/services over set thresholds, three-quotes for large purchases, purchase committee approvals.
• Payroll controls: HR to authorize hires/changes, timesheets/attendance records for payroll, payroll reconciliation.
• Asset register: update on acquisition/disposal, periodic physical verification.
6. Budgeting, cash flow & scenario planning
• Prepare annual operating budget aligned to the school year: enrollment by grade, fee schedule, expected collections, salaries, and capex.
• Monthly cash-flow forecast (rolling 12 months) to ensure payroll and supplier payments are covered across term breaks.
• Scenario planning: low-enrolment, delayed grants, unexpected repairs (roof, boilers) — maintain a reserves policy (e.g., maintain X months of payroll in cash reserves).
7. Reporting & KPIs (examples) Monthly reports for management/board:
• Balance sheet by fund
• Statement of Activities (Income & Expenditure) YTD vs Budget
• Cash position and 12-month cash forecast
• Tuition AR aging — by student and cohort
• Payroll summary (headcount, total payroll, benefits)
• Fund/grant report: budget vs spent; remaining balances
Key KPIs
• Enrollment by grade and term-on-term change
• Fee collection rate (cash collected / billed) — monthly & YTD
• Days cash on hand (cash / monthly operating expenses)
• Payroll as % of total expenses
• AR > 90 days (amount and % of total AR)
• Operating margin (surplus/deficit as % of revenue)
8. Month-end close checklist (practical)
• Post all receipts (tuition, canteen, other).
• Reconcile bank account(s); file bank statements and reconciliation sign-off.
• Reconcile tuition AR and post deferred revenue adjustments for prepayments.
• Accrue payroll and statutory liabilities (PAYE, NSSF, NHIF).
• Post depreciation and other recurring accruals.
• Reconcile AP and record any accruals for invoices not yet received.
• Review restricted funds/grants and prepare grant status report.
• Produce management pack: P&L vs Budget, balance sheet, cash summary, AR/AP aging.
• Approvals/sign-offs for major variances.
9. Practical first steps (action list)
• Confirm legal form and registration status (KRA PIN, company/NGO registration, NSSF/NHIF registration).
• Choose fiscal year-end that fits your academic operations.
• Set up accounting software with the COA above and enable classes/locations for grades/campuses.
• Create student fee structure and invoicing templates; implement AR ledger per student.
• Draft core policies: fee collection, procurement, petty cash, payroll.
• Set up monthly reporting templates and an initial budget.
John Omollo
