Small business owners in South Africa might have to brace for an indefinite period of lockdown as the nation awaits the next presidential address. Of course, this means business owners need to implement further cost cutbacks to protect their already dwindling cash flows and keep their businesses above water. 

COVID-19’s effect on your business finances. 

If you haven’t already done so, it’s vital to perform a simple assessment of the current financial situation. The process should involve reviewing your current expense, revenue and profitability. Ask yourself the following questions so that you can effectively draw key insights from your assessment:

1. How does your current assessment compare to one from a month ago, and has anything significantly changed? 

2. If you’ve had the adequate cash flow to sustain your business thus far, what would an extended COVID-19 lockdown mean for your business?

Once you’ve completed this process, you’ll be able to begin the forecast of your cash flow and cut any costs to ensure that business survives. 

1. Time to remove non-essential expenses.

When conducting your financial assessment, you should have made three expense lists, namely, Fixed, Variable and Periodical. When looking at these three expense lists, start removing any non-essential expenses. 

It’s imperative to be notably critical during this process. If something doesn’t contribute to the core of your company, we recommend removing or cancelling it. Should you find something that appears necessary but you’re unsure, we recommend researching alternative solutions which are cheaper or even free. For any periodical expenses, you might be able to defer or reschedule services such as service costs or vehicle maintenance. 

2. Reduce your fixed expenses. 

As your production and revenue have more than likely stalled, effectively reducing your fixed expenses is crucial to your company’s survival. Of course, your most significant fixed expense is your rent. We advise approaching your landlord for a reduction or relief or alternate solutions. 

Furthermore, now is also the time to attempt renegotiating your bond and any other debt, by letting the institutions you deal with that the COVID-19 pandemic has negatively affected your business and ability to meet repayments. Several major banks have announced payment relief holidays during this time of crisis. 

3. Renegotiate fixed fees. 

We advise contacting any service providers and attempting to change your fixed contracts to pay-per-use contracts wherever possible. For instance, consider changing from paying monthly fees for set amounts of data to pay-as-you-go options for your business cellphone contracts. Moreover, you might even be able to suspend specific payments until they’re in use again, such as business fibre lines. 

4. Request payment deferrals and extensions from your suppliers. 

It’s wise to approach your suppliers and propose deferring from payments during the pandemic. Instead of waiting until the time where you might miss a payment or receive overdue notices, contact your suppliers with solutions. As all businesses and supply chains have been impacted during this crisis, several major suppliers expect this and could be able to provide help. 

5. Make use of SARS payment holidays for PAYE.

Several employers have been afforded with tax relief benefits as announced by President Ramaphosa back in March. 

The relief includes R500 monthly tax subsidies for private-sector workers earning below R6500 as per the Employment Tax Incentive, SARS has been asked to speed up the payments of employment tax incentive reimbursements from twice a year to monthly in an effort to get cash in the hands of compliant employees as soon as possible. Any tax compliant business with a turnover of less than R50 million per annum is allowed to delay 20% of their workforce’s tax liabilities over the next three months as well as a portion of their provisional corporate income tax payments without incurring any penalties or interest during the next six months. For information refer to the SARS website.

Conclusion

An essential aspect of revisiting your expenses during this pandemic is effective forecasting of what each month might incur for your business. Regardless of whether you’re set to reopen for trading soon will depend on your business and sector.