Fee Notes in Kenya: Fee Note vs Invoice, and Billing Audits at Milestones

Short answer: In Kenyan practice, a fee note is the bill an audit, tax or law firm sends for its services. It works like an invoice, but the name comes from custom, not tax law. Under eTIMS, a business must issue electronic tax invoices through KRA's system, so each firm must settle how its fee notes and eTIMS invoices relate. Audits are usually billed at milestones.

This guide is for partners, practice managers and finance staff in Kenyan audit, tax and accounting firms: what a fee note is, how it compares with an invoice, what it should contain, and how to bill an audit at milestones while watching work in progress (WIP) and yield.

Creodata sells audit management software, including audit software for Kenyan firms, so we say plainly where it fits near the end. The template and the billing method work with or without any software. This is practical guidance, not tax or legal advice: confirm with your tax adviser how your fee notes and eTIMS invoices should work together.

What a fee note is

"Fee note" is the term Kenyan accountants, auditors, advocates and consultants commonly use for a bill of professional fees. It tells the client what work was done, for which engagement or period, what is owed, and how and when to pay.

Three things set it apart from a trader's sales invoice in everyday use:

• It bills services and time, not goods. The description is of work done: "Statutory audit of the financial statements for the year ended 30 June 2026, second instalment", not a list of items and quantities.
• It often bills part of a larger fee. An audit fee agreed in the engagement letter is commonly billed in instalments, so each fee note refers back to the engagement and to the share of the fee it covers.

None of this is a legal definition. We have not found a Kenyan statute that defines a "fee note" for accountants, so treat the term as practice, and treat the tax rules on invoices as the ones that bind.

Fee note vs invoice

The confusion comes from "invoice" meaning two things: any bill, and a tax invoice that meets KRA's requirements.

So "fee note vs invoice" is rarely a choice. A firm bills with a fee note and also has tax invoicing duties under eTIMS; how the two documents meet is what each firm must settle.

Fee notes and eTIMS

Section 23A of the Tax Procedures Act requires a person carrying on business to issue electronic tax invoices through the Commissioner's system. KRA's own eTIMS guidance says all persons in business must on-board eTIMS, and that from 1 January 2024 a business expense must be supported by an electronic tax invoice to be deductible, with listed exclusions.

For audit firms this has two practical consequences:

1. Clients will ask for the eTIMS invoice, because they need it to deduct your fee.
2. A fee note made outside eTIMS is not an eTIMS invoice. A document produced in a word processor or a practice system is not issued through KRA's system on its own, however complete it looks.

Firms arrange this differently, for example issuing the eTIMS invoice as the bill with the fee note as a covering statement, or sending the fee note first and quoting each document's number on the other. Which arrangement suits your firm, and when the tax point falls, is a question for your tax adviser; we do not give tax advice here. Whatever you choose, write it down, apply it to every client, and make each fee note traceable to its eTIMS invoice.

A fee note template

The fields below are a practical checklist, not a legal format. Add anything your tax adviser, your engagement letters or your clients require.

A fee note sample layout

[Firm name] · [Address] · KRA PIN [firm PIN]

FEE NOTE No. [FN-2026-0142]            Date: [date]     Due: [date + 30 days]

To: [Client legal name], [address], KRA PIN [client PIN]
Your reference: [PO or contract number]

Engagement: [AUD-2026-031] Statutory audit, year ended 30 June 2026
Milestone: Second instalment, fieldwork complete (40% of agreed fee)

Professional fee for this milestone ................ KES [amount]
Disbursements (itemised overleaf) .................. KES [amount]
VAT at [rate]% ..................................... KES [amount]
Total due .......................................... KES [amount]
Less received on account ........................... KES [amount]
Balance due ........................................ KES [amount]

eTIMS invoice reference: [number, where issued]
Pay to: [bank, account, branch] · Paybill [number] · Reference: FN-2026-0142

Signed: ______________________  [Partner name], for [Firm name]

The numbers and references in square brackets are placeholders to replace, not a format KRA or ICPAK prescribes.

Billing audits at milestones

Billing an audit only at sign-off leaves the firm financing weeks of work. Milestone billing ties each instalment to a point in the engagement both sides can see, agreed in the engagement letter so no fee note is a surprise.

AuditEDMS's default is 40, 40 and 20 percent of the agreed fee. It is an example that many firms will recognise, not a professional norm, and your engagement letters decide the split.

Other patterns exist, such as a retainer and a balance, or monthly billing on a long group audit. Whatever the split, four habits keep milestone billing clean:

• Put the schedule in the engagement letter, with the triggers in words the client understands.
• Raise the fee note when the milestone is reached, not at month end when someone remembers.
• Bill each milestone once. A second fee note for the same instalment, raised by a different person, is an easy mistake and an awkward conversation.
• Record part payments against the right fee note, so the balance and the ageing stay true.

Work in progress and yield

Work in progress is the value of approved, chargeable time spent on an engagement that has not yet been billed. On a fixed-fee audit, WIP tells you whether the time already spent has run ahead of the fee you have billed.

Yield compares what the engagement earns with the value of the time it took. A common way to measure it:

• Value of time = hours by grade × that grade's charge-out rate.
• Yield = fee − value of time, and as a percentage of the fee.

To illustrate the arithmetic only, not a benchmark: an audit agreed at KES 1,000,000 with approved time worth KES 850,000 at charge-out rates has a yield of KES 150,000, or 15 percent. If time reaches KES 1,100,000, yield is minus 10 percent, and the partner should know before the final instalment is billed.

WIP and yield are only as good as the timesheets behind them: time recorded weekly and approved by a manager gives numbers a partner can act on; time reconstructed at sign-off does not.

Where Creodata fits

AuditEDMS, our audit management software, turns approved time and engagement stages into fee notes. Billing milestones are set against the stages of each engagement type (40, 40 and 20 percent of the fee by default, at the engagement letter, fieldwork complete and signed accounts), and reaching a milestone stage raises a draft fee note, or prompts the partner, depending on the setting you choose. Each fee note carries VAT at the rate in your settings, records part payments until it is paid, and cannot be raised twice for the same milestone on the same engagement. Staff record time against engagement and stage in weekly timesheets, managers approve it, charge-out rates are set by grade, and work in progress and yield per engagement come from approved time. Billing percentages and payment terms are settings your administrator changes, not code.

It does not replace your accounting system or eTIMS. Fee notes stay in AuditEDMS: it does not post them to a ledger and it does not issue or transmit electronic tax invoices to KRA, so your eTIMS invoicing continues as it does today. AuditEDMS runs in your own Azure subscription, with documents in your own SharePoint. On Microsoft Marketplace, Basic is US$200 a month for firms of up to 30 staff and Enterprise US$500 a month for firms of up to 75 staff, with priority support; pilots are by invitation. See audit software in Kenya for how it fits ICPAK firms.

Frequently asked questions

Is a fee note the same as an invoice in Kenya?

In everyday use, a fee note is the invoice a professional firm sends for its services. It is not automatically a tax invoice: under section 23A of the Tax Procedures Act, electronic tax invoices are issued through KRA's system. Confirm with your tax adviser how your fee notes and eTIMS invoices should relate.

How should an audit firm split its fee into milestones?

However the engagement letter says. A common pattern is a share on acceptance, a share when fieldwork ends and the balance on signing; AuditEDMS's default of 40, 40 and 20 percent is one example. Choose triggers the client can see, and bill each one once.

What is the difference between WIP and yield?

WIP is the value of approved, chargeable time not yet billed. Yield compares the fee with the value of all the time spent at charge-out rates. WIP tells you what you could still bill; yield tells you whether the engagement is earning its keep.

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See how AuditEDMS for Kenyan audit firms raises fee notes at the milestones you set and shows WIP and yield per engagement: request a pilot.