How Kenyan Businesses Should Record Dollar Sales and Exchange Differences

When a Kenyan business invoices in US dollars, euros or pounds, the amount recorded in the bank account often differs from the invoice because of bank fees and exchange‑rate movements.

The recommended practice is to record the sale on the invoice date using a consistent rate source – for example the Central Bank of Kenya’s published rate or the rate built into the accounting software.

When the foreign payment arrives, the business should record the local‑currency amount actually credited, then allocate the difference to separate accounts for bank charges and exchange gain or loss.

Bank charges include the provider’s fee, any intermediary‑bank margin and the exchange‑rate spread; these are not discounts from the customer but costs that must be booked separately.

The exchange gain or loss is calculated from the difference between the invoice‑date rate and the rate the bank actually used to convert the funds, and should be posted to a dedicated profit‑and‑loss account.

An illustrative example shows a USD 10,000 invoice at 130 LCU per dollar (1,300,000 LCU). After a USD 30 bank fee and conversion at 127.50, the bank credits 1,271,175 LCU, creating a shortfall of 28,825 LCU (about 2.2%).

Breaking down the shortfall reveals a bank charge of 3,825 LCU and an exchange loss of 25,000 LCU, which together reconcile the original invoice amount.

Businesses should match each receipt to the specific invoices it settles, especially when customers pay multiple invoices together or make partial payments, to avoid mis‑applying exchange calculations.

A monthly review checklist helps keep foreign‑currency accounting accurate: reconcile the foreign‑currency bank account, verify open invoices, revalue any outstanding amounts at month‑end rates, and compare bank‑charged fees and conversion rates with reference rates.

By keeping bank margins and exchange effects in separate accounts, Kenyan firms can see whether profitability comes from their pricing or from currency movements, and can negotiate better bank terms or consider quoting in alternative currencies.