STAY HOME AND STAY SAFE. For more information and support on COVID-19 visit www.sacoronavirus.co.za

5 ways to cut costs during the COVID-19 pandemic

To keep your business afloat during the COVID-19 pandemic, you will need to cut costs as critically as you can.
covid-19-cut-costs-1200x675

Small businesses across South Africa will have to brace for another 2 weeks in lockdown which means further cost cutting to protect their cash flow and keep their business afloat. 

COVID-19 and your business’s finance

If you haven’t yet, take a look at our previous blog post on how to perform a simple assessment of your financial situation. This process will involve looking at your expenses, revenue, and profitability. Here are some ideas of the questions you can ask yourself to draw insight from your assessment. 

  1. How does your assessment compare against one from a month ago? What has changed?
  2. If you had enough of a cash float to sustain the business for a month of closure, what will an extended COVD-19 lockdown mean for you? 

Once you have completed this, you can begin to forecast your cash flow and cut costs to ensure your business stays afloat. 

Here are five ways to cut costs effectively before making staff cuts. 

1. Remove non-essential expenses

During your financial assessment, you would have made three expense lists (Fixed, Variable, and Periodical). From these, begin to remove non-essential expenses. These can fall within any of the three categories.

Be very critical during this step. If it doesn’t contribute to the core of your business, remove or cancel it. If it appears that something might be necessary but you aren’t sure, try to research other solutions that might be cheaper or even free. This way you can replace it with the alternative until trading returns to normal.

For periodical expenses, you might be able to defer or reschedule services, for example, vehicle maintenance or service costs. 

2. Reduce fixed expenses

With your production and revenue at a halt, reducing your fixed expenses is key. Your biggest fixed expense is likely your rent. Approach your landlord for a reduction, or alternate solution. 

You can also try to negotiate relief on your bond, and debt by letting institutions know that COVID-19 has impacted your business and ability to make repayments. Most major banks have announced payment holidays during the pandemic. You can use your sales history reports from Business Portal to prove loss of income if you are a Yoco merchant.

3. Renegotiate fixed fees to a pay-per-use basis

Contact service providers and change your fixed contracts to pay-per-use contracts where possible. For example, switching from paying a monthly fee for a fixed amount of data to a pay-as-you-go option. You might even be able to suspend certain payments until they are in use again. For example, business internet lines.

4. Request payment deferrals, holidays, and extensions from suppliers

Approach your suppliers with a proposal for deferring payments. Rather than wait until you miss a payment or receive an overdue notice, approach your suppliers with a solution. With all businesses and their supply chain affected during this time, many major suppliers will be expecting this and may be able to help you. After all, their business is reliant on partnerships with many businesses just like yours. 

5. Utilise the SARS payment holidays for PAYE

Certain employers have been granted with tax relief benefits, as announced by President Cyril Ramaphosa on March 23rd.  The relief includes: R500 monthly tax subsidies (for private sector employees earning below R6 500 under the Employment Tax Incentive), SARS has been requested to accelerate payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible. Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their employees’ tax liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. For more visit SARS web page. There are employee tax considerations which you can read online here

A key part of this exercise is forecasting what each month may look like for your business under the terms of the COVID-19 pandemic. Whether or not you’re likely to reopen for trading soon is dependent on the type of business you own. Most retail businesses may be blocked from trading for much longer than the lockdown. In this instance, you may have to provision for another month of closure and further investigate the option of online retail and delivery.

How does this affect your ability to cut costs? You might find yourself incurring new kinds of expenses with an online business model. If online is working well for you, will you make the jump entirely and forego a rented retail space to save money? 

Join our community group to talk through other ideas for saving money and cutting costs. 

Share post to Social Media:

Share on facebook
Share on twitter
Share on linkedin
Share on google
Share on reddit
Share on whatsapp
Share on telegram
Share on email

More Reading

A vector image on the popup for a Yoco newsletter.

Join over 80 000 business owners

Get the latest relevant news and tips on making your business a success delivered to your inbox weekly.