Multi-currency invoicing and VAT for growing African businesses

Start with your country's invoicing rules

Before comparing features, find out whether your country requires invoices to be issued or reported through a government system. Several African tax authorities operate electronic invoicing or fiscal device schemes, in which every invoice must be generated, signed or transmitted through approved software or hardware. Kenya's eTIMS is one example; there are others, and more are being introduced.

If such a scheme applies to you, the system that issues your invoices must be approved for it or connected to an approved one. Ask your tax adviser exactly what applies to your business, your sector and your turnover. That answer decides how any ERP fits: as the system that issues invoices, or as the books and stock system that works alongside an approved invoicing device.

Choosing a base currency

Your base currency is the currency your books, balance sheet and profit and loss are kept in. For most businesses it is the local currency, because that is what the tax authority, the bank and the statutory accounts expect. Some groups keep a subsidiary's management books in US dollars as well; that is a reporting choice to agree with your auditor, not a shortcut around local requirements.

Then decide which currencies you invoice in. Exporters often invoice in US dollars or euros. Businesses trading across a region may invoice neighbouring customers in their own currencies. Each foreign-currency invoice needs an exchange rate, recorded on the invoice when it is raised.

Exchange rates and volatile currencies

Where currencies move quickly, small decisions about rates have large effects on reported profit. Agree these with your accountant and write them down:

• The rate source. Central bank, commercial bank or a published feed, applied consistently.
• The rate date. Usually the invoice date. Do not re-rate old invoices when the currency moves.
• Settlement differences. When a customer pays a US dollar invoice weeks later, the local-currency value has changed. The difference is an exchange gain or loss, and it should be recorded as one, not hidden in sales or bank charges.
• Period-end balances. Whether, and how, open foreign-currency balances are revalued at month end.

Configuring VAT

VAT rates, exempt and zero-rated categories, registration thresholds and withholding rules vary widely across the continent. A practical setup:

• Create a tax code for each rate and treatment you actually use, and default each product and service to the right one.
• Zero-rate exports only where the law and your evidence support it.
• Keep output VAT and input VAT in separate ledger accounts.
• Where customers withhold VAT or income tax from payments, record the withholding certificate against the invoice, so the customer's balance and your tax credit are both right.
• Review the setup with your tax adviser before the first return, and again when rates change.

Mobile money, cash and bank accounts

In many markets a large share of customer payments arrives by mobile money or in cash rather than by bank transfer. Treat each mobile-money wallet and each cash till as its own account in the books, exactly like a bank account: record receipts against the invoices they settle, record transfers between wallets and the bank as transfers rather than income, and reconcile each wallet to its statement every month. Fees charged by the provider are an expense, not a reduction of sales. When a customer pays one invoice in several instalments from different channels, allocate each receipt to the invoice so the customer balance stays right.

Accountant review

For many small businesses the accountant is external and sees the books monthly or quarterly. Make that review easy:

• give the accountant their own login rather than sending spreadsheets;
• reconcile bank and mobile-money accounts monthly, against statements;
• keep every figure traceable to a document;
• close each month after review, so later changes are visible as corrections.

Stock and branches

Distributors and retailers that grow across towns, or across borders, need stock by location, transfers that are dispatched and received, batches and expiry where products demand it, and regular counts. Each legal entity in another country should usually be its own company in the system, with its own base currency and tax setup, rather than a branch of the parent.

A first-month checklist

1. Confirm with your tax adviser whether an e-invoicing or fiscal device scheme applies to you.
2. Write down your base currency, invoice currencies and rate policy.
3. Set up tax codes for the rates and treatments you use, and check them with your adviser.
4. Create an account for every bank, wallet and till, with opening balances that match statements.
5. Raise one invoice in each currency, record a payment against it and look at the ledger together with your accountant.
6. Close the first month only after the accountant has reviewed it.

Where NAQIX fits, and where it does not

NAQIX supports configurable VAT rates per legal entity, invoicing in multiple currencies with the exchange rate saved on each invoice, inventory across branches, and an accounting workspace built for accountant review: bank reconciliation, ageing reports, variance explanations and a month-end close signed off by a second person. Subscriptions for the region are priced in USD.

Local tax returns and e-invoicing or fiscal device integrations are not built in. If your country requires invoices to pass through an approved system, confirm with your tax adviser how NAQIX would sit alongside it before you choose. The NAQIX page for Africa says the same, and the Tax & compliance, Accounting & reports and Inventory pages list the features.