Learning Resource

Glossary of Terms

30 entries · Updated July 2026 · Nairobi

Glossary of Terms

Accounts Receivable (Debtors)

Money your customers owe you for goods or services already delivered. It sits on your balance sheet as an asset, but it is not cash until it is collected. Why it gets checked: an analyst looks at how large your receivables are relative to sales and how old they are. Big, aging receivables mean your working capital is parked in other people’s businesses. Kenya context: an SME supplying corporates on 60 to 90 day terms can have a full quarter of revenue sitting in receivables at any time. That is the number the Cost of Waiting calculator prices.

AGPO (Access to Government Procurement Opportunities)

A Kenyan government program reserving 30 percent of public procurement for enterprises owned by youth, women, and persons with disabilities, accessed through an AGPO certificate. Why it gets checked: procurement officers verify the certificate is valid and matches the tender category before applying the preference. An expired or mismatched certificate forfeits the advantage. Kenya context: many eligible SMEs register once and let the certificate lapse. Renewal is free and online through the AGPO portal, and the certificate belongs in your standing tender file.

Business Information Report (BIR)

A verified profile of a company compiled by a business intelligence firm: registration status, ownership, directors, financial indicators, credit conduct, litigation, and operational footprint. Why it gets checked: counterparties commission a BIR before extending significant credit or signing a supply contract, because it replaces what the company says about itself with what the records say. Kenya context: ASAP Information Services produces BIRs for lenders, corporates, and investors screening Kenyan businesses. If a large client has ever gone quiet on you during onboarding, a report like this was probably being read.

Cash Ratio

Cash and bank balances divided by short-term liabilities. The strictest liquidity test: what you could settle tomorrow morning without collecting a shilling or selling anything. Why it gets checked: it shows how much of your obligations survive a bad collections month. Kenya context: with corporate payments routinely arriving late, Kenyan analysts weight cash-based measures more heavily than textbooks suggest. A business that looks liquid on paper but holds no cash is one delayed invoice from missing payroll.

Cost of Money (Cost of Capital)

What a shilling costs you to have, expressed as an annual percentage. If you borrow, it is your facility rate. If you fund from your own resources, it is the return that money would have earned elsewhere in the business. Why it gets checked: every financing and payment terms decision prices against it. Kenya context: CBK data put the average commercial lending rate at 14.7 percent in March 2026, with SMEs commonly borrowing at 15 to 18 percent, and non-bank credit far above that. Know your own number; every calculator on this site starts with it.

CR12

An official document from the Kenyan Registrar of Companies listing a company’s registered directors and shareholders. Why it gets checked: it proves who actually owns and controls the business. Banks, corporates, and government tenders require a recent CR12, typically not older than 90 days to one year depending on the buyer. Kenya context: obtained through eCitizen. A common tender failure is submitting a stale CR12 or one that contradicts other documents after a shareholding change. Keep it current and consistent.

Credit Limit

The maximum exposure a supplier or lender is willing to carry on your account at any one time. Why it gets checked: the limit is set before you ever hit it, usually from your financials, payment history, and a rule of thumb such as a share of your net worth or turnover. Exceed it and orders stop, quietly. Kenya context: most Kenyan SMEs never see the limit a supplier has set for them; they only feel it when a large order gets declined. The Financial Health Check shows the heuristic range a counterparty might start from.

Credit Reference Bureau (CRB) Listing

Your record at Kenya’s licensed credit reference bureaus, built from data submitted by banks, microfinance institutions, and other lenders under CBK regulations. Includes both positive repayment history and negative listings for default. Why it gets checked: it is the first stop for any lender and, increasingly, for corporates screening suppliers. Kenya context: you are entitled to one free credit report per year from each bureau. Check yours before a lender does; disputes over stale or erroneous listings take time you will not have mid-application.

Current Ratio

Current assets divided by current liabilities: everything you own that turns to cash within a year, against everything you owe within a year. Why it gets checked: it is the standard first read on whether a business can pay its way through the next twelve months. Below 1.0 means obligations exceed near-term resources. Kenya context: an analyst reviewing a Kenyan SME reads a current ratio of 0.8 as strained and starts asking which bills wait when cash runs short. The Financial Health Check bands it for you.

Debt to Equity Ratio

Total liabilities divided by total equity: whose money runs this business, yours or your creditors’. Why it gets checked: high leverage means creditors carry the risk and will price accordingly; negative equity means the business owes more than it owns, which is a stop sign in most credit reviews. Kenya context: SMEs that grew on supplier credit and mobile loans often carry more leverage than the owner realises, because informal debt rarely makes it onto the balance sheet the bank sees. Put it all on paper before the analyst finds it.

Due Diligence

The structured investigation a counterparty performs before committing money or signing a contract: verifying identity, ownership, financials, compliance, track record, and reputation against independent sources. Why it gets checked: the entire point is that claims are cheap and records are not. Kenya context: due diligence on Kenyan businesses draws on the companies registry, KRA status, CRB data, court records, and reference checks. It is ASAP’s core trade, and everything on this site teaches you to see your business the way that process sees it.

Early Payment Discount

A price reduction offered in exchange for payment well before the agreed terms, quoted as a percentage and a day, for example 2 percent if paid within 10 days. Why it gets checked: buyers evaluate whether the discount beats their own cost of money; you should run the same arithmetic in reverse. Kenya context: the break-even discount at 16 percent cost of money on 60-day terms, paid day 10, is about 2.19 percent. Offer more than the break-even and you are paying your buyer better than your bank would charge you. The Cost of Waiting calculator computes yours.

Enhanced Due Diligence

A deeper level of investigation applied when the stakes or the risk indicators are higher: source of funds, beneficial ownership through layers, adverse media, litigation history, and site or reference verification. Why it gets checked: standard checks answer who you are; enhanced checks answer whether the picture holds under pressure. Kenya context: regulated institutions apply it under POCAMLA and CBK guidance for higher-risk customers. ASAP’s Enhanced Business Evaluation applies the same discipline for SMEs who need their file to survive a counterparty’s hardest look.

Factoring

Selling your invoices to a financier at a discount. The factor pays you most of the invoice value now, collects from your customer, and keeps the difference plus fees. Unlike invoice discounting, your customer typically knows and pays the factor directly. Why it gets checked: factoring converts receivables to cash but signals to a sharp analyst that working capital is tight, and it changes who your customer legally owes. Kenya context: priced above bank term lending. Worth it when the cash unlocks stock or a tender; expensive as a habit.

Gross Margin

Sales minus cost of goods sold, divided by sales. What is left of every shilling of revenue after the direct cost of what you sold. Why it gets checked: it reveals whether the core trade makes economic sense before overheads touch it. It is also heavily sector-dependent, so analysts compare you to your industry, not to a universal standard. Kenya context: a distributor at 12 percent gross margin can be healthy; a service firm at 12 percent is usually in trouble. Know your sector’s normal before judging your own number.

Invoice Discounting

Borrowing against your unpaid invoices while you continue to collect from your customers yourself. The financier advances a share of invoice value and charges interest or a fee for the days until payment. Why it gets checked: analysts note it as a working capital tool; used routinely, it says your terms are longer than your cash can carry. Kenya context: available from banks and specialist financiers, typically priced above term loans. The Cost of Waiting calculator’s financing scenario prices it against your own cost of money.

Knockout Condition

A single fact that ends a deal regardless of how strong everything else looks: no valid registration, missing tax compliance, an unresolved default, a prohibited ownership conflict. Why it gets checked: first, because it is cheap to check and saves the cost of reviewing everything else. Kenya context: the BCI applies four knockout rules for exactly this reason. A business scoring well on eight pillars still fails onboarding if the KRA certificate is expired. Fix knockouts before polishing anything.

KYC (Know Your Customer)

The identification and verification process regulated institutions must perform before doing business with you: who you are, who owns you, where the money comes from. Why it gets checked: it is law for banks and increasingly standard practice for corporates onboarding suppliers. Kenya context: governed by POCAMLA and CBK guidelines, with the Financial Reporting Centre as the oversight body. For an SME, KYC readiness means your identity, ownership, and registration documents agree with each other and are current. Contradictions between documents are what stall onboarding.

KRA Tax Compliance Certificate (TCC)

An official confirmation from the Kenya Revenue Authority that your tax affairs are current, issued through iTax and valid for twelve months. Why it gets checked: it is a hard requirement in government tenders and most corporate prequalification, and an expired TCC is one of the most common knockout conditions in Kenyan procurement. Kenya context: application is free on iTax, but unresolved filings or balances block issuance, and fixing those takes longer than the tender deadline allows. Renew it before you need it, every time.

Net Margin

Net profit divided by sales: what actually survives to the bottom line after every cost, interest, and tax. Why it gets checked: it is the summary verdict on whether the business model works. Thin or negative net margins mean growth burns cash instead of building it. Kenya context: an SME showing strong sales growth with a net margin near zero reads to an analyst as a business working hard to stand still, often because financing costs and late payments are eating the operating profit. The Financial Health Check bands it.

Operating Margin

Operating profit divided by sales: what the business earns from its actual operations before interest and tax. Why it gets checked: it separates the trading engine from the financing around it. A healthy operating margin with a weak net margin points at the cost of debt; weak operating margin points at the business itself. Kenya context: for SMEs borrowing at 15 to 18 percent, this distinction is the whole story. Analysts read the gap between operating and net margin as your interest burden made visible.

Payment Terms

The agreed number of days between delivery and payment, such as net 30 or net 90, sometimes with an early payment discount attached. Why it gets checked: terms decide who finances the transaction. Every day of terms is a day you are lending your buyer money at your cost of capital. Kenya context: market practice runs roughly 30 days between SMEs, 60 to 90 days from large corporates, and up to 120 days on imports. The Cost of Waiting calculator prices what your terms cost, including when they are not honoured.

Probability of Default (PD)

A statistical estimate of the likelihood that a borrower fails to meet obligations within a period, usually twelve months, produced by models calibrated on real repayment outcomes. Why it gets checked: lenders price loans and set limits from it. Kenya context: a defensible PD requires verified data and a model fitted to the local market. Be wary of any free tool printing a precise PD from self-typed numbers; the precision is fake. That is why BizInfo tools give you bands and model zones instead, and why a verified assessment exists as a separate service.

Quick Ratio

Current assets excluding stock, divided by current liabilities. The liquidity test with inventory stripped out, since stock is the slowest current asset to become cash. Why it gets checked: for businesses holding significant inventory, the current ratio can flatter; the quick ratio shows what happens if the stock does not move. Kenya context: wholesalers and retailers with healthy current ratios often show quick ratios below 0.7, which tells an analyst the liquidity story depends entirely on how fast shelves clear. Both numbers are in the Financial Health Check.

Readiness Indicator

A structured self-assessment score describing how prepared a business looks against the criteria counterparties apply: documentation, compliance, financial discipline, governance. It measures preparedness, not creditworthiness, because it verifies nothing. Why it gets checked: it tells you, before anyone else looks, where the file is weak. Kenya context: the Business Confidence Index is a Readiness Indicator by design and says so openly. It is the rehearsal; due diligence is the performance. Use it to fix what the audience will notice.

Retained Earnings

Accumulated profits the business has kept rather than paid out to owners, sitting inside equity on the balance sheet. Why it gets checked: it is the record of whether the business has historically made and kept money. Thin retained earnings in an old business tell an analyst the profits leave as fast as they arrive. Kenya context: owner-managed SMEs often drain profits through the owner’s account, leaving equity that looks weaker than the business really is. Formalising what stays in strengthens every ratio a lender reads.

Return on Equity (ROE)

Net profit divided by total equity: what the owner earns on the money left in the business. Why it gets checked: investors compare it to what the same money would earn elsewhere; lenders read very high ROE on very thin equity as risk rather than brilliance. Kenya context: with government securities historically offering double-digit yields, a Kenyan SME returning less than that on equity has to answer why the capital is in the business at all. It is a fair question; have the answer ready.

Supplier Prequalification

The screening process a corporate or government buyer runs before admitting you to its approved vendor list: documents, compliance, capacity, references, and increasingly a site or systems check. Why it gets checked: buyers would rather filter suppliers once than manage failures continuously. Kenya context: the checklist differs by buyer type. Banks check more than corporates; counties differ from national tenders. The gaps are almost always documents that were obtainable months earlier. The Procurement Readiness Checker audits you against the actual lists before the deadline does.

Trade Credit Insurance

A policy that pays out if your customer fails to pay, typically covering a percentage of the invoice for a premium quoted as a share of turnover or invoice value. Why it gets checked: it removes default risk from your receivables; it does not remove the cost of waiting, and the two stack. Kenya context: available through local insurers and regional trade credit specialists, more common on export and large corporate exposure. The Cost of Waiting calculator’s insurance scenario shows the premium alongside the waiting cost so you price both.

Working Capital

Current assets minus current liabilities: the cushion between what turns to cash this year and what falls due this year. Why it gets checked: it is the day-to-day survival number. Negative working capital means the business runs on its suppliers’ patience. Kenya context: long corporate payment terms push Kenyan SME working capital into receivables, which is why a profitable business can still miss payroll. Managing working capital in Kenya largely means managing the gap between your terms with buyers and your terms with suppliers.

AfCFTA

The African Continental Free Trade Area, a trade agreement creating a single market across the African Union, ratified by 49 of 54 signatories. It allows qualifying goods to move between member states at preferential tariff rates.

Rules of Origin

The criteria that decide whether a product counts as originating in an AfCFTA member state and therefore qualifies for preferential tariff treatment. All AfCFTA rules of origin were finalised in February 2026.

HS Code

The international Harmonized System number that classifies a traded product. Duty rates, origin rules, and export documentation all key off it, so a wrong code cascades into wrong duty and border delays.

Certificate of Origin

The document proving a product meets the rules of origin, presented at the border to claim preferential tariff treatment. More than 40 African countries now issue AfCFTA certificates of origin.
Incoterms

Standard international trade terms (such as EXW, FOB, and CIF) that define exactly where the seller’s cost and risk end and the buyer’s begin. Quoting a term you do not understand converts a sale into an open ended liability.

Landed Cost

What a product actually costs once it has arrived in the destination market and cleared customs, including freight, duty, insurance, and handling. Businesses that cannot compute it win orders they lose money on.

PAPSS

The Pan African Payment and Settlement System, an Afreximbank initiative allowing cross border payments between African countries in local currencies. It now connects 28 countries and more than 190 banks and fintechs.

Business Information Report (BIR)

An independent, evidence based report on a company: verified registration and ownership, trading status, directors, adverse records, and payment behaviour. It is what you commission before extending credit to, or relying on, a counterparty you cannot see.

Readiness Indicator

A score computed from a business’s own unverified answers, indicating how prepared it looks rather than how it will actually perform. Both the BCI and the AERI are Readiness Indicators, and neither is a credit score.