Cutting Costs During A Pandemic
The most effective strategies include removing non-essential expenses, reducing fixed costs, renegotiating contracts, requesting payment holidays, and utilising available tax relief measures.
Lockdown may have some positive side effects which could lead to improving our survival in the future, should we choose to embrace them. It is not necessarily a bad thing being forced to minimise our expenses and become more self sufficient. We as individuals have become quite consumerism-driven, which has led to insufficient usage of our limited resources. This could be applied in businesses as well, in that if they do not adapt, they could be forced to close their doors for good.
Fortunately there are plenty of methods available to assist in the transition of becoming more cost effective. Here are 5 practical ways to reduce expenditure without resorting to staff cuts:
Remove non-essential expenses
Identify expenses which are not core to your business and remove or cancel them. Also evaluate if there are alternatives to expenses you are not sure are a necessity, there might be more affordable or even free options.
Reduce Fixed Expenses
Fixed expenses continue even when revenue slows, making them a priority for cost reduction. Rent is often one of the largest overheads, and many landlords are open to negotiation during periods of economic hardship.
Options include:
- Negotiating temporary rental reductions or deferred payments
- Requesting payment holidays from banks or financiers
- Reviewing insurance, utilities, and security contracts for savings
Reducing fixed costs helps align expenses with reduced production or trading levels.
Renegotiate fixed fees to a pay-per-use basis
Contact service providers to negotiate fixed contracts to pay-per-use contracts where possible. You might even be able to suspend certain payments until they are in use again for e.g. business internet lines.
Request payment holidays from suppliers
Instead of waiting for a notice of overdue payment, approach your suppliers with a proposal to defer payments. Many suppliers are expecting this in light of the lock down and it better to be in good stead with suppliers than to default on payments since business is a partnership after all.
Utilise SARS PAYE and Tax Relief Measures
The South African government introduced tax relief measures to support businesses during the pandemic. Qualifying, tax-compliant businesses with a turnover of less than R50 million may benefit from:
- Deferring 20% of PAYE liabilities over several months
- Delaying portions of provisional corporate income tax payments
- Avoiding penalties and interest during the relief period
Businesses should regularly review SARS announcements and consult professionals to ensure compliance and maximum benefit. For more info visit the SARS webpage: https://www.sars.gov.za/Media/Pages/CoronaVirus.aspx
In our current economic climate it is essential for businesses to estimate a forecast as to what the next couple of months will look like under the Covid-19 pandemic. Furthermore, investigate the possibility of an online business model if your industry allows it. The future business landscape will be very different to the norm we were once used to, but the key to survival is adaptability and resilience. Make sure you utilise every opportunity at your disposal, you and your stakeholders survival depends on it.
Retrenchments should be a last resort. Many cost-saving measures can be implemented before cutting jobs, helping businesses retain skills and recover faster post-crisis.
Yes. Landlords, banks, and service providers are often open to renegotiation during periods of financial strain, especially when approached proactively.
Tax-compliant businesses may qualify for SARS PAYE deferrals and provisional tax relief, depending on turnover and compliance status.
Delaying payments through negotiated agreements is usually better than cancelling contracts, as it preserves supplier relationships and avoids long-term operational disruption.
Businesses should focus on forecasting, digitisation, flexible cost structures, and diversification to remain competitive and resilient in a changing market.
