As a medical professional in Kenya, your day is a marathon of high-stakes decisions. Whether you are a Medical Officer pulling extra shifts to fund your dream clinic, a specialist transitioning into full-time private practice, or an established consultant navigating the halls of multiple Nairobi hospitals, your focus is (and should be) on your patients.
However, the financial vitals of your practice often tell a story that clinical excellence alone cannot. You might be a brilliant surgeon, but if your clinic is struggling with SHIF backlogs or if KRA is flagging inconsistent withholding tax certificates, your peace of mind is at risk.
Transitioning from an employee to a business owner or a multi-income consultant requires a shift in mindset: treating your finances with the same diagnostic rigour you apply to a complex case.
Most doctors don’t go into medicine to run businesses. Yet the moment you open a clinic, even as a side hustle, you become one.
This guide is written for doctors at different stages of private practice who want one thing: to run a clinic that is clinically sound and financially stable without turning into accountants themselves.
Why do many private clinics struggle financially even when patients keep coming?
A common scenario: A GP in Nairobi sees 25–30 patients a day. Consultation rooms are full. Staff are busy. Yet by mid-month, cash is tight. Rent is due. Suppliers are calling. SHIF payments are still pending.
This happens because revenue and cash are not the same thing.
Many clinics earn well on paper but struggle because:
- Income is not tracked properly
- Expenses creep up quietly
- Insurance payments delay cash coming in
- Taxes are handled late, often in panic mode
Accounting is not about paperwork for KRA. It is about knowing, at any point, whether your clinic is financially healthy.
Starting a private practice: what really changes?
Many private and specialist clinics in Kenya start as the founders’ side-hustle.
You work full-time at a public hospital, a mission facility, or a private hospital. On off days or evenings, you see patients in a small rented space. At first, this feels manageable.
Then the clinic grows, and everything changes.
Moving from PAYE to running a business
As an employed doctor, your tax life is simple. You receive a PAYE payslip. Taxes are deducted. You move on.
Once you start a clinic, you become a business owner. That means:
- You must track income yourself
- You are responsible for declaring taxes
- You must keep records that make sense
Many doctors underestimate this shift. The result is confusion, missed filings, or unexpected tax bills.
Choosing the right business structure for your clinic
One of the earliest accounting decisions is how to register your practice.
Sole proprietorship
This is common for small clinics and solo practitioners for these reasons:
- Simple to register
- Lower compliance burden – in terms of financial reporting & governance
- Suitable when starting out
However, clinic income is treated as your personal income, which can push you into higher tax brackets as earnings grow.
Limited company
This is a more common structure for growing practices or specialist clinics because of:
- Better separation between personal and clinic finances
- Clearer structure for expansion or partnerships
- Higher compliance and reporting requirements
There is no one-size-fits-all answer. The right structure depends on your income level, growth plans, and risk exposure.
READ ON:How to Pick and Register the Right Business Entity for Your Private Medical Clinic
The hidden costs of starting and running a clinic
Many doctors budget for rent and basic equipment but overlook ongoing costs that quietly drain cash.
Common examples include:
- Annual practice and county licenses
- Medical indemnity insurance
- Professional subscriptions
- Equipment depreciation (your ultrasound machine loses value every year)
- Clinic management software and IT support
Take the case of a specialist in Parklands who only realized his ultrasound machine was a financial drain when it broke down twice in one year, yet he had never accounted for maintenance or depreciation. He only noticed the severity of the situation when he engaged an accountant who also identified equipment servicing, insurance renewals, and software fees as other costs that were eating into their profits. On paper, income was high. In reality, margins were thin.
Good accounting doesn’t just record what you spent. It helps you understand what assets are helping the clinic and which ones are quietly hurting cash flow. – and then put measures in place to mitigate the costs.
What basic financial records should every medical clinic keep?
You do not need complex spreadsheets. You need consistency.
At a minimum, every clinic should track:
- Daily income (cash, card, SHIF, private insurance)
- Operating expenses (staff, rent, supplies, utilities)
- Insurance claims submitted and paid
- Major equipment purchases
Simple accounting practices that keep clinics under control
Accounting only works when it becomes routine.
Good clinic habits include:
- Keep your personal finances separate from the clinic’s
- Record income and expenses daily or weekly
- Using basic accounting software instead of notebooks (Quickbooks Online and Zoho Books are simple, affordable tools that we highly recommend)
- Reviewing clinic finances every month
Waiting until year-end to “figure things out” is how tax problems and cash shortages begin.
Managing taxes as a medical practitioner in Kenya
For many medical specialists in Kenya, income does not come from one place, effectively making them multi-revenue businesses. Their income streams look something like this:
- Locum at two or three private hospitals
- Run a specialty clinic at an established hospital
- Operate their personal private clinic
- Earn from procedures, call duties, or outreach programs
While this may look like a financial successful enterprise, there is a huge risk of tax fragmentation
Potential tax risks from multiple income streams
When you receive a PAYE slip from one hospital and a consultant fee from another, the Kenya Revenue Authority (KRA) sees them as one total bucket of income.
The danger is that each payer might tax you as if they are your only employer. By the end of the year, your total income might push you into a higher tax bracket than what was deducted at the source, leading to a massive, unexpected tax bill.
How should doctors track income from different hospitals?
Without proper tracking, you cannot reconcile what you earned versus what was taxed. At the bare minimum, you should ensure that you religiously perform these two activities:
1. Record-keeping
Every consultant working in multiple facilities should keep records of the following:
- Contracts or engagement letters
- Monthly payment schedules and/or payslips
- Withholding tax certificates: Every time a hospital pays you a consultant fee, they deduct 5% (or 15% for non-residents) withholding tax. Ensure you collect these certificates digitally via iTax. They are essentially pre-paid tax receipts.
2. Reconciliation
At the end of the month, match your bank deposits against your payslips and certificates. It’s easy to lose track of a locum payment from three months ago.
Deductible expenses doctors often miss
Tax is not a one-way street. You can reduce your taxable income by claiming legitimate business expenses. Many doctors overpay tax because they do not claim these work-related expenses:
- CME and Conferences: The cost of attending a medical symposium in Mombasa or an international webinar is a business expense.
- Professional Fees: Your annual KMPDC license fees and memberships to bodies like the KMA are deductible.
- Medical Software: Subscriptions for patient management systems or digital diagnostic tools.
- Work Travel: Fuel and maintenance for your car if it’s used to move between different practice locations.
- Medical journals and online subscriptions
If the expense supports your professional work, it may be deductible. You should keep records of all these expenses, as they can reduce your tax burden at the end of the financial year.
Installment tax: a buffer to tax shocks
Most Kenyan taxpayers wait until the June 30th deadline to pay their balance. However, if your tax liability exceeds KES 40,000 for the year, KRA requires you to pay Installment Tax.
This means paying your tax in four portions throughout the year (April, June, September, and December). Doing this prevents that dreaded mid-year cash crunch.
READ ON:Everything You Should Know about SME Taxation in Kenya
The Financial Reality of Running a Private Clinic
Profit does not pay salaries. Cash does. Running a stable, successful clinic is often more about logistics than medicine.
This is where many private clinics struggle – especially those heavily dependent on insurance.
The insurance trap
Insurance companies and SHIF rarely pay immediately.
Consider a decent clinic that serves 20 patients in a day, most of whom use corporate insurance. On paper, it has made KES 100,000. However, the insurer might take 60 to 90 days to settle those claims. In the meantime, the clinic still has to pay the nurses, buy medical supplies, and pay rent & utilities.
This is the gap between profit and cash flow. And this is what kills otherwise healthy clinics.
Handling the claims cycle
- The Aging Report: You need a list that shows exactly how long each insurer has owed you money.
- Rejected Claims: Sometimes a claim is rejected due to a missing signature or a coding error. If you don’t follow up immediately, that money is as good as gone. In accounting, if a claim is definitely not going to be paid, we call it bad debt. Writing it off correctly ensures your books aren’t inflated with ghost money you’ll never see – and which worsens cash flow decisions.
Meeting payroll during medical insurance delays
Your staff cannot wait 90 days for their salaries. Successful clinics maintain a cash reserve (a buffer of at least three months of operating expenses) to ensure that even if an insurer delays payment, the team stays paid and motivated.
It is also prudent to avoid over-hiring too early until your cash flow accommodates the staff.
Effective Cash Flow Management Practices for Medical Clinics
Cash flow is the single biggest reason private clinics struggle even when they are technically profitable. And often what stresses out the owners more than patient care.
Here are practical, proven ways Kenyan medical clinics can stay financially steady.
- Track cash separately from revenue
Insurance income is not cash until it hits your bank account. Clinics should track cash & card payments received, insurance claims submitted, and insurance payments actually received.
- Shorten the insurance payment cycle
As mentioned earlier, most Kenyan insurers operate on long credit cycles. Delays are common, but unmanaged delays are avoidable.Submit clean, complete claims, track aging claims weekly and compare with each insurer’s payment cycle (30, 60, 90 days).
Most importantly, follow up consistently with insurers and SHIF when delays occur before the amounts become bad debts. Clinics that actively follow up get paid faster than those that wait.
- Control Supplier Payment Timing
Cash flow improves when cash inflows and outflows are paced evenly. Where possible, negotiate payment terms with suppliers and avoid paying everything upfront when insurance payments are pending.
- eTIMS and Expenditure Diagnostic
With the KRA’s 2026 mandate for automated validation, every expense, from the cotton wool you buy in downtown Nairobi to your clinic’s rent, must be backed by an eTIMS-compliant invoice. If you don’t have a valid electronic tax invoice, you cannot deduct that expense, effectively increasing your tax burden.
- Segment Your Revenue Streams
Don’t mix your locum fees from major private hospitals with your own clinic’s daily cash collections. Use separate buckets to ensure your personal life isn’t accidentally cannibalizing the clinic’s operating capital.
- Build a Payroll Buffer
Aim to keep at least three months of staff salaries in a high-yield savings account. This protects your core team from morale-draining delays when insurance reimbursements are slow.
- Review Cash Flow Monthly
A short monthly review should answer three questions:
- How much cash came in?
- How much went out?
- How long can the clinic operate if insurance delays continue?
If you can answer these clearly, your clinic is in control.
When Does a Doctor Need Professional Accounting Support?
You wouldn’t ask your receptionist to perform an appendectomy; similarly, you shouldn’t feel pressured to be a tax expert.
Many doctors try to manage finances themselves – which can work early on.
But you likely need professional support if:
- Income is growing but you’re struggling to pay bills
- Taxes feel confusing or stressful
- Financial decisions are made by gut feeling
- You feel a sense of dread when you see an email from KRA.
- You spend your Sunday afternoons struggling with spreadsheets instead of resting.
A specialized accountant doesn’t just crunch the numbers. They provide you with clear, jargon-free reports that tell you which parts of your practice are actually making money and ensure you stay compliant with PAYE for your staff and income tax for yourself.
Work With Alphacap: Financial Specialists for the Health Specialists
You’ve spent years mastering medicine; you shouldn’t have to spend your nights mastering tax law.
Alphacap understands the unique financial heartbeat of the Kenyan medical sector. From reconciling withholding tax across multiple hospitals to setting up robust eTIMS-compliant bookkeeping for your clinic, we handle the paperwork so you can handle the patients.
Would you like us to run a financial health audit on your practice? Let Alphacap ensure your clinic is as healthy as the people you treat: contact us today.
Conclusion: treat your clinic like a patient
Treat your financial records with the same care you treat a patient’s medical history. Early diagnosis of a cash flow gap or a tax discrepancy is much easier to treat than a full-blown financial crisis.
By being proactive, you build a practice that supports your life rather than draining it.