Like a cannon ball between the eyes, the dreaded “R” word (recession) has hit our economy hard. We have started to feel and see its knock-on effects. Talks of further increases in fuel levies, seeing food and electricity prices going up and noting a sombre feeling when talking to the average business man and woman on the street.
We at J Theron and Pietersen Incorporated have put together a list of suggestions that can assist you to navigate these difficult times in running a successful and sustainable business:
- Keep on top of your costs:
Cost cutting is not always easy, but you can manage your costs more efficiently, especially your overheads. Your business overheads should not fluctuate with more than 2 – 5% per month, depending on your industry, and budgeting for these should be relatively easy. Set up your monthly budget including VAT, and know exactly where you are spending your money. Cut on costs you can control, i.e. go into a fixed monthly service level agreement with your IT company and accountant. Knowing you pay for a set service each month is far better than receiving one big invoice that you don’t know how to pay. Change work cell phone contracts to fixed packages per month.
- Utilise debit orders:
Setting up most of your fixed costs on debit orders and stop orders, takes away the temptation to utilise your cash flow on something other than your service providers. Just a quick chat to your service provider or bank, can make a world of difference.
- Lower credit card limits:
Business and private credit cards can pose spending temptation. Calculate an average spending per month on these credit cards, and lower the limit to just above that. This takes away that burning feeling in your wallet to just swipe away.
- Stretch bonuses:
December bonuses has become a common occurrence in our country. Change things up a bit, rather than paying bonuses each year in December, opt for another option, such as paying bonuses in three increments throughout the year, or paying each employee their bonus in their birthday month, or month they have started working for you.
- New debt is a no-no:
Rolling your debt is not a great idea in these economic times. Paying off old debt with new debt can land you in hot water if not appropriately regulated. Doing this to save on interest and bank charges can work, but creating more debt because one collector is phoning every day is a no-no. If you do see that you might not be able to make your scheduled debt payment each month, be proactive. Go and see the bank and see if you can re-negotiate payment terms, or go onto a payment holiday on long term debt.
- Stay on top of your taxes:
Owing money to the South African Revenue Service can come at a great cost. The word interest and penalties is a bitter pill to swallow. You can avoid being out of pocket even before you need to pay SARS. Consider opening up separate bank accounts for each of your taxes. Each month you can transfer your PAYE, VAT and income tax into separate bank accounts, and when the SARS bill arrives you will be able to pay it stress free. Trust us, SARS interest and penalties is far worse than additional bank charges on new bank accounts.
- Efficiency is the key:
Track your company’s efficiency on a monthly basis. You can do this by project, project line, division and employee. With this you will clearly see what the profitability problem is. Is it price? Or labour? Price is unfortunately something that can’t be fixed over night, but over a period of time. Efficiency from staff members or a production line can be rectified a bit quicker. Make your workforce part of the solution. Put efficiency targets in place for them to meet, make then clearly understand what efficiency means to them and the company, make efficiency part of the company’s culture and values. Individual discussions and evaluations can give efficiency a great boost. Just keep in mind that you cannot sacrifice quality for efficiency.