Cutting Costs

Cutting Costs During A Pandemic

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

It is key to reduce fixed expenses as production and revenue are at a halt. The biggest expense most businesses have is rent, consider negotiating with your landlord for a reduction or alternative solution. Most banks have also announced payment holidays to their clients as a result of the pandemic.

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 holidays

President Ciril Ramaphosa announced on 23 March that certain employers have been granted with tax relief benefits. 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. Also a portion of their provisional corporate income tax payments can be deferred without penalties or interest over the next six months. For more info visit the SARS webpage:

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.

Stressed bearded business man talking on the phone in the office

Save now, But Pay Later?

Save now, pay later? Cancelling your insurance premiums might save you money now, but this could cause serious problems in the future, highlighting, even more, the importance of a personal insurance broker to help adjust your package to your personal needs. Insurance providers recognize the financial strain lockdown has put on their clients and are adjusting their policies and even paying back some premiums in response to provide relief.

Tough economic times could mean that the household must take stock of monthly payments and make tough decisions on cutting down on some expenses. Insurance policies are the first to be scrapped since they are often viewed as luxury items. However, it seems that even if one saves money on monthly premiums, it is seldom a good idea to be without cover and protection, exposing your loved ones should something happen to you. Estimates state that motorists claim every 3 to 5 years from their insurance, and that there is no guarantee that you will not be involved in a crash.  Canceling vehicle insurance would expose one to even more financial risk with South Africa’s high accident statistics.

It is important to evaluate other means of saving before canceling essentials like insurance. If you cancel your policy and start a new policy when your circumstances change, you could end up paying higher premiums or be excluded from certain benefits, depending on your age and health.

Good habits as a result of economical driving also result in the longevity of your vehicle, therefore as economic pressure builds, individuals should not abandon good driving behavior. There are many new means of saving to be taken into account during lockdown:

  • Motorists have been given some relief with petrol price decrease at the start of the year.
  • Implementing fuel saving techniques could save you up to 20% of your monthly fuel expense.
  • Ensure that your insurance premiums accurately reflect your vehicles book value annually.
  • Investigate the cost-savings of combining your insurance with others in your household.
  • Most insurance providers will help you find a way to restructure the policy to reduce the premium.
  • Some insurance providers will allow the policy holder a payment break for a few months and make up in the shortfall afterwards.

It is called an accident because no one plans on having one, wouldn’t you rather save money and be covered in such event than be left unprotected before considering all your options? Contact your personal insurance broker specialist today to assist you in evaluating and restructuring your insurance policies.

Real Estate - House and dollar sign

Best Opportunity For You To Own A Home In A Decade:

Property has always been a stable investment, but Is it a good time to invest or buy a home considering our current economic climate? Interest rates are the lowest they have been in decades and are expected to fall further before the end of the year. Rates have fallen by 2,25% since January, no transfer duty on pre-owned homes priced at less than R1 million and prices are expected to be extremely negotiable. This is because of the expected increase in stock in the market from distressed sellers.

Other factors that contribute to the affordability to invest in property are:

  • Property prices become highly negotiable as owners and investors who cannot afford to keep their existing properties release them on the market with aim to sell them quickly.
  • Interest rates declining making it easier to obtain a home lone and afford monthly payments.
  • Demand in rental homes rise for individuals who do not have means to buy.
  • Decline of the Rand reaction to Moody’s downgrade in March means that SA property is now that much more affordable and attractive to overseas investors.

Lower income individuals are more able than ever to enter into the formal property market. Essential workers would be even more eligible to obtain financing since they receive a stable income even during nationwide lockdown limitations. These limitations have sped up the inevitable digitalization of the real estate market. More agencies are gearing up to be able to offer prospective clients virtual tours of their listing through the use of Matterport cameras. Not only would one stand to make substantial gain on their investment, the economy will also be stimulated, aiding in the recovery after the devastating economic effects of national lockdown.

“The reason is not only that you will stand to make substantial gains if you do buy, but that you will also be helping to build up our economy and create employment. Rising demand for housing will eventually mean more construction, which is a major employer, but in the meantime every property bought will help to generate more jobs in sectors like transport, the manufacture of furniture and other household goods and the supply of various household services. Building up SA’s property sector as fast as possible will be one of the best ways of creating jobs and making sure that individuals get back into employment,” says Berry Everitt, CEO of the Chas Everitt International property group.