In South Africa’s challenging small business ecosystem, cutting costs can be key to profitability.

The challenge is to reduce operational expenses without compromising quality and efficiency.

Really effective cost cutting doesn’t involve one drastic intervention. Rather, it’s about making incremental changes across an entire operation.

Below we outline cost cutting measures that business owners and entrepreneurs can implement right away.

Trim the fat

Any costs that aren’t adding value to a business (and that don’t directly threaten jobs) should be among the first you axe from the budget. Together, lots of little savings can add up fast.

Cancel unnecessary subscriptions

Does your business definitely need all the software it’s currently paying to use? Ditching unnecessary subscriptions (monthly and annual) could net significant savings.

Go fully digital

Are you buying unnecessary supplies? It could be time to go fully digital rather than spending on stationery and photocopiers for internal use. It doesn’t take long to learn new, paper-free habits.

Cut kitchen costs

Reduce spending on kitchen supplies like coffee and milk. And rethink spending on unnecessary features like water coolers.

Reduce internet and phone costs

Shop around in case your business can spend less on internet access – and take steps to prevent unnecessary cell phone costs.

Negotiate lower charges

Call the bank to find out if there are options you can take to reduce bank charges for your business. And if your business has insurance, call the insurer too. You may be able to negotiate a rate reduction.

Cut unnecessary perks

Reduce or eliminate discretionary spending on employee perks, end of year parties, entertainment and travel. It can help to communicate properly with staff. People who know the full situation will understand decisions that prioritise their job security over “frills”.

Revisit supplier lists and relationships

Depending on the nature of your business, you may be able to save on the cost of supplies. This could involve:

• finding new, more competitive suppliers, locally and/or outside South Africa
• renegotiating prices with existing suppliers
• changing specifications for supplies (there may be acceptable, cheaper alternatives).

It might also be possible to cut costs by buying in greater bulk. This won’t make sense if you’re trying to handle a cash crisis though.

Prioritise keeping cash in the bank until you know the basics, like rent and salaries, are covered.

Streamline staff performance

For most businesses, salaries are a major expense.

However, it can be rash to retrench employees, leaving other staff overloaded, ill-equipped and unhappy (and more likely to quit after you’re already down to “bare bones”).

This can also be expensive, given the cost of legally required severance packages.

Sometimes drastic restructuring is necessary. In other situations, it’s possible to make smaller, more gradual changes.

Address known performance problems first. This might involve laying off workers you know don’t give their best or have the needed competencies.

If there are employees who are sitting idle for part of the day, assign new tasks that fall within their skill sets or areas of expertise.

If a position has to be filled, consider hiring someone at a lower salary level. Alternatively, make the decision to combine roles or eliminate the position altogether.

Take a ‘hands-off’ approach

Reduce the time and cost involved in micromanaging employees.

As a hands-on business owner, you may be spending too much time supervising and co-ordinating activities. That is best left to the managers or heads of department.

Keeping the day-to-day running of operations at arm’s length allows for greater input into core areas of business, such as applying for tenders and orders, negotiating deals and overseeing operations.

Automate manual tasks        

For any business wondering how to cut business costs fast in South Africa, the time has come to consider automation.

A broad range of digital and automation tools – including AI, traditional software and automation hardware – can simplify and streamline the full gamut of business tasks.

Leveraging technology is a powerful way to reduce expenditure, potentially at the same time improving efficiencies and quality.

It takes careful consideration, however. Don’t fall for hype. Spend where returns in your industry are proven and the initial costs won’t force risky or unwise financial compromises.

Co-ordinate overlapping purchases and activities        

If your business has several departments, ensure they are not conducting similar activities or purchasing the same items.

Rather consolidate business activities, like photocopying and faxing, into one office, and buy stationery and office supplies in bulk.

That way, the cost of miscellaneous items is easier to monitor and control.

Plus, the business saves money by making large scale purchases, avoids replication and reduces staff costs by having a dedicated admin assistant in charge.

Delay or reduce salary increases

It might be necessary to withhold salary increases and bonuses. In this case, it’s wise to be upfront with staff.

Explain the situation and steps you’re taking to improve the company’s financial situation. And once cash is available, take immediate steps to compensate employees.

If the business can support salary increases, bring these in line with industry-wide remuneration levels.

Check to see what competitors are paying staff. If your employees are getting above market rates, consider implementing an increase that is a few percent lower than the previous year’s.

An alternative if you’re struggling with a short-term cash crisis

Cutting business costs now can improve cash flow over coming months. To bridge a short-term gap in cash flow in the meantime, it could make sense to consider a loan.

At Lamna, we offer fast, discreet loans against the value of a wide range of movable assets, from vehicles to artwork. This type of funding is much quicker and easier to obtain than a bank loan – and doesn’t impact your credit score.

For more information about using an asset to secure a short-term loan, contact us on 086 111 2866 or simply complete and submit our online application form.