Junk Status Is Not The End – It Can Get A Lot Worse!

There is a perception that we will be scraping the very bottom of the barrel if Moody’s does indeed downgrade our debt to the dreaded Junk Status – that ‘There’s no way to go but up’, that ‘This is the beginning of our rehabilitation process’ and so on.

Regrettably that’s not so at all. If our economy continues to go the wrong way there could be much worse in store for us – have a look at our table of the various categories used by Moody’s in its “Investment Grade” and “Non-Investment Grade” rankings.

We discuss the implications, and our way forward.

It is now widely expected that sometime in the next year or so Moody’s will downgrade South Africa’s debt to junk status. Many see this as the beginning of the process to rehabilitate ourselves. True, initially we will go through a difficult period as ±R150 billion of our debt will be sold as many offshore institutional investors cannot hold junk bonds which leads to a fall in the currency, higher interest rates and lower economic growth. But then we knuckle down and begin to reform the economy and embark on the process of returning to investment grade.

However – things can get much worse

Source : Moody’s 

We are currently Baa3 with Moody’s and are on a negative watch with them which means they will put South Africa on Ba1 (i.e. junk status) if we don’t get economic growth on an upward path and rein in our rising debt.

As you can see, we can keep dropping to Ba2 and all the way down to C which means South Africa has defaulted on its debt obligations and there’s little prospect of recovery.

It can happen – just look at Venezuela and Zimbabwe – where optimistic assumptions are made on economic growth and government expenditure but in fact the country just raises taxes, incurs more debt, until you need to borrow money just to pay off debt that falls due. Each drop on the Rating Matrix raises the cost of borrowing and the downward spiral continues.

The ultimate problem with this scenario is that it eventually becomes irreversible, which is when default on debt becomes a distinct possibility.

The reality is that until genuine reforms are put in place, we will continue to descend along the Rating Matrix ladder.

What should we be doing? 

Paying off as much debt as possible is a good start. We should also carefully consider any future expenditure and analyse just how necessary it will be, particularly if it is in foreign currency. Some analysts recommend that we should become as self-sufficient as possible (e.g. boreholes, solar power).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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How To Detect and Dodge Financial Scams

Financial scams have always been around but their scale in today’s world is truly amazing – estimates of annual losses in the USA alone reach $120 billion.

The good news is that there are positive steps you can take to protect yourself, and perhaps the first and most important of these is getting to grips with the different types of “con” and how they work.

First question we ask ourselves therefore is “What is a ‘quick con’, and what distinguishes it from a ‘long con’?” Then – the really important bit – we look at what types of people are most vulnerable to the con artists. Make sure you aren’t one of them!

“If it sounds too good to be true, it probably is” (wise old adage)

In the USA, $40 billion is lost every year to scammers. When you consider statistics suggesting that 65% of scam victims don’t report their losses (usually they are too embarrassed to admit they have been conned), as much as $120 billion could annually be skimmed from gullible people.

Scammers normally target people who are financially vulnerable (they have lost their jobs or their business has folded) or they take advantage of economic downturns where a large percentage of people experience financial hardship.

The quick con

Typically, it is difficult to fully get to grips with the scheme they sell you as the scheme’s workings are hard to fully understand. But the conmen tell you that the real issue is you will get astronomical returns and they will show you for example pictures of yachts cruising in the Mediterranean – messaging you “this is the life you will lead once you have made your quick fortune”.

Because they prey on the financially vulnerable, the conmen spin conspiracy theories – the reason you have fallen on hard times is the system has crushed you and this scheme bypasses all the financial regulation “nonsense” – and the like.

Conmen are also hard salesmen and they will pressurise you into making this “investment”.

The long con

You need to be really careful of these as you are up against some sophisticated operators. The main principle is to get assurance from people in your social circle that the scammer or the scheme is credible and achieves high returns (these people are wittingly or unwittingly part of the con). In addition, the scammers can point you to well-known financial experts who will vouch for the scheme (they typically are part of the con).

It is usually a Ponzi scheme which will operate successfully until no new funds come into the scheme. It then unravels very quickly, and the vast bulk of investors lose their investments.

Another type of scam is “pump and dump” where salesmen extol a little-known share, and this drives the price up. These salesmen make aggressive pitches to unsuspecting victims who get carried away by the upward momentum of the share. Once the share has gone way over its value, the conmen sell it short (the dump of the scheme) and the share price collapses.

Who is vulnerable to these scammers?

Strangely enough it is often well-to-do people (usually men) who are experiencing financial stress and are happy to take on risk. These people are well educated and financially literate.

The combination of factors that makes them gullible is (apart from being under financial stress):

  • Being put under pressure by the conmen (they need to get in “before it’s too late” and their friends “are making a killing”)
  • The scheme can be complex or opaque and so they rely on their intuition
  • Most of these people are decent and trusting, so they tend to believe the conmen and they don’t want to let the conmen down (no doubt the scammers are aware of this vulnerability)
  • Greed is a very powerful emotion and can lead to impulsive decisions which you will regret later.

Sir Isaac Newton was a great genius, but he lost all his money in the South Sea Bubble scam in the 1720’s.

So before you get caught up in a scam step back and think rationally. You should also analyse yourself and if you have any of the above traits, then be very careful of any investments that are “too good to be true”.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Your Tax Returns Are Due: Make Sure You Fill In Your Return Correctly

The last thing you need is to have the Taxman after you with his armoury of penalties and threats of criminal prosecution; and the likelihood of that happening if you put a foot wrong is higher than ever now with SARS missing its collection targets and pressured to up its game substantially.

So do not take your tax return deadlines – your next one is 31 January if you are a provisional taxpayer using eFiling – lightly!

We share some thoughts on “the need for speed” and on the nightmare scenario that awaits taxpayers who fail to tick the right tick box in the right part of the online form and are as a result deemed guilty of “material non-disclosure”.

“The hardest thing in the world to understand is the income tax” (Albert Einstein)

Provisional taxpayers using eFiling need to have completed and submitted their 2019 income tax return on or by 31 January.

Make sure you are prepared for this and don’t underestimate the time needed to put the return together. As a starting point you should have a good filing system which makes it easy to find documentation needed to both fill in the return and upload to SARS in terms of supporting schedules.

The income tax return form runs to more than thirty pages, so there is plenty of work to be done – don’t leave it to the last minute!

Your return must be complete

The onus is on you to satisfy SARS that your return is comprehensively and completely filled in. Thus, even if you supply SARS with all the documentation and explanations required, not ticking a box in the form that is applicable can lead to SARS deducing that you have not met your obligation of full disclosure.

This is important as if SARS deems there to be a material non-disclosure in your return (remembering that SARS tends to apply a very narrow interpretation of this) then the three year prescription period for your tax return is waived and SARS can go back and start raising queries on your 2010 return for example. This can put you onto a nightmare road, so take extra care.

We are all aware that SARS has been missing its collection targets in recent years and is under enormous pressure to maximise revenue from taxpayers.

Your accountant is there to assist you – this is a good time to make use of his or her services.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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What Will The Next Decade Bring Us?

As we settle into 2020 let’s all, with the wise old saying “Failing to plan is planning to fail” in mind, start thinking about not only what the next year or so holds for us, but about what our world could look like in 2030.

Of course that means predicting the future, a notoriously difficult exercise at the best of times and perhaps a particularly challenging one in these days of increasingly frenzied change.

We can however identify a number of global trends emerging which will at the very least get us pointed in the right general direction. So let’s have a look at some of them…

“If we can win the Rugby World Cup three times, surely it is not asking too much of this country to take the High Road twice when its future is on the line? When push comes to shove, ordinary South Africans can do extraordinary things!” (Clem Sunter)

The major global trends that have recently emerged and are widely predicted to continue to dominate the world are:

  • A rising tide of nationalism and anger at the status quo which manifests itself in trying to stop immigration into Western Europe and the United States, an increasing move away from free trade and more and more civil unrest. If you put all this together, it will result in slower global economic growth and rising tensions within countries and conflicts between nations (India and Pakistan, Turkey and the Kurds/Syrians, the USA and Iran to name a few).

For South Africa, which is dependent on growing trade, this will put more pressure on an already struggling economy. Civic unrest is also a significant trend here and hopefully we can recreate the 1990s when we stunned the world by negotiating a peaceful transition to democracy.

  • Superpower tensions as China vies to overtake the USA both economically and militarily. Russia is also showing global ambitions. So far this has played itself out in US tariffs against China and sanctions on Russia, but you can expect this to hot up.

South Africa is a long way from these battle grounds and should be spared any conflicts that arise. In fact, we will probably benefit as the superpowers vie for influence which should translate into investment into our declining infrastructure.

  • The last decade has been characterised by easy money and low interest rates, which opens the distinct possibility that there will be another economic crash similar to the one in 2008.

This would not be good news for South Africa as our economy is already stretched by rising debt. We survived the last crash well as we had strong economic fundamentals and were able to fight the effects of the crash with an economic stimulus program but now we have no leeway to counteract a global recession, should there be a crash.

Another factor is whether we will drop to full junk status which will be detrimental to the economy.

  • Shadowing and shading everything is climate change which has arrived and is making itself increasingly felt. Already we have seen how a disastrous drought was one of the causes of the Syrian civil war and we know how dry parts of South Africa are. Rising levels of carbon dioxide are making the world hotter (already temperatures have risen by 1 degree centigrade and continue to rise) – if temperatures rise half a degree, it will cost the world $56 trillion to deal with the effects.

The problem with climate change is that it compounds all the above problems like rising numbers of refugees, less food etc. Desertification will drive more people into crowded cities along with more extreme weather events.

More and more climate change specialists are saying we are getting closer to a tipping point whereby climate change becomes irreversible. Why don’t we all commit in our own small ways to reduce the carbon emissions we cause and to look to ways to conserve water?

None of our problems are insurmountable!

Although we are clearly going through increasingly risky global and local times, none of our problems are insurmountable. With will and a spirit of compromise we can achieve surprising things – nobody realistically expected South Africa to win the Rugby World Cup, but we did.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Sometimes the best management is to take a back seat

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“When the best leader’s work is done the people say
‘We did it ourselves’” (Lao Tzu)

Management is probably more of an art than a science – sometimes you need to get actively involved in an issue and other times you need to stand aside and let your staff get on with it.

Significantly, if you do not get it right, your staff can become demotivated and few companies perform well when their staff is unhappy.

First, recognise that you are not always right

It is natural to think that as the leader you have been put there because you make the correct decisions. Research shows that this is not always true.

Currently, one of the big fads is “Management By Walking Around” (MBWA) whereby you spend a lot of time observing your staff at work. Whilst doing this you usually engage in a running commentary on the best way of doing their tasks.

When the matter is relatively simple, your instructions are normally correct (but ask yourself do you really need to intervene here?) but when the matter is complex, you are just as often wrong with the advice you are dispensing. Complicated issues take plenty of thought and study before the optimal solution is discovered.

Spontaneous orders should not be issued in these cases unless you have dealt with this problem before. When you give your staff an incorrect instruction, it undermines your credibility apart from the cost of setting your remedy aside.

In a recent study of 56 managers, it was found that performance improvement was higher with managers who do not practice MBWA.

How do you know when not to intervene?

One example in a case study is a manager who deliberately spends time with hostile employees.  She believes that even if they don’t openly confront her, she will get a good idea of whether they think she is interfering too much.

Another method is to actively cultivate frank dialogue with your staff. This is not always easy to do but if you make a point of accepting their criticisms, they will be encouraged to speak their mind. We always speak about being open and transparent in our day to day interrelations with employees, so try to practise it.

A good leader makes every effort to understand his or staff so that they respect and work for the good of the business. Look for the little signals your staff send out when they have doubts about your management.

Being attuned to your staff and knowing when to step in decisively (e.g. in a crisis) or when to take a step back (unlocking a multi-faceted problem) will yield better results and will make your business a place where your employees are happy and positive.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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How to prepare your business plan

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“If you fail to plan, you are planning to fail!” (Benjamin Franklin)

Previously we discussed why a business plan is so important, this month we look at the mechanics of compiling it.

There are many templates available (most banks have pretty good ones), and by using one you can ensure you cover all the relevant topics involved –

  1. Plan and research

A business plan involves a considerable amount of work and is a structured process.

This phase of the business plan, typically, takes about 65-70% of the time in putting together the document. The better your planning and research, the better will be the business plan.

  1. Do a company overview

When you visit a new website, you look for a “who we are”, and a “what we do” section, so you can quickly ascertain if it is worth looking at the rest of the website. Then you look at products and/or services, then the management of the business, followed by financial history (if available). A good website will have captured the essence of the business and will give you a good idea of it and more importantly how focused and how well it is run.

Doing an analogous exercise for your business puts it into clear focus. By now you have carried out your research and preparing the company overview establishes just how well you know your business and can also show up any potential flaws in your venture that you will need to address.

  1. Document your business

This is the detail part of the plan. Having completed research and done a high-level overview now you drill down into the various aspects of the company, such as production, sales, marketing, finance, human resources plus other areas unique to the business.

Don’t forget you will need to show investors, bankers or whoever the business plan is aimed at just how well you know your venture.

  1. Prepare your Strategic Marketing Plan

This is important to investors and stakeholders – what products/services you intend to launch and in what areas (Africa or Europe etc), how you will promote them, how you will make use of social media, your pricing strategy, how you will stretch your brands by line extensions etc, what market segments you are in and plan to get into, what customers you plan to attract and how you plan to grow your business through them.

As all this will cost money, show how you plan to invest this money into making your business profitable.

  1. Prepare your Financial Plan

This is really the summary of the business plan. You will need to do income statements, balance sheets and cash flows. Set out key data such as margins, detailed cost breakdowns and so on. It is important to demonstrate your mastery of your business by showing a well thought out financial plan.

Finally, your commitment and passion for the business should come through; if you know your own business, explain it in your own words.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The CIPC to intensify compliance enforcement from January

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The Companies and Intellectual Property Commission (CIPC) has announced new requirements for companies and close corporations when completing their Annual Returns.

From 1 January 2020 it will be mandatory to complete a compliance questionnaire when submitting the Annual Return.

The rationale for the questionnaire

The CIPC will use this questionnaire to assess areas of non-compliance with the Companies Act (“the Act”) and will take action where it sees the need to address any weaknesses.

It also serves to ensure that directors and officers of companies know and understand the mandatory compliance aspects of the Act.

If you don’t complete the questionnaire, then you won’t be able to file the Annual Return.

What is in the questionnaire?

You are asked to state whether you comply with a list of important areas of the Companies Act (for smaller companies, you can mark quite a few of these as non-applicable).

The main areas covered are:

  • Have you satisfied yourself that the company meets liquidity and solvency requirements?
  • Does your Memorandum of Incorporation, a new shareholders’ agreement or changes to one, or changes to company rules comply with the Act?
  • Have you compiled Annual Financial Statements in line with the Act’s requirements?
  • Do you handle financial assistance to directors correctly?
  • Is your shareholder register compliant?
  • Do directors run the company along the stipulations set out in the Act?
  • Do you have a company secretary?

It is an offence to make a false declaration to the CIPC, so when doing this for the first time, make use of your accountant’s services.

When to submit the Annual Return

Companies are required to submit their Annual Return in the thirty business days after the anniversary of their date of incorporation – i.e. if the company was incorporated on 10 June then you have thirty business days from 11 June to complete the return.

Close Corporations have the two months from the first day of their month of incorporation to submit their returns i.e. if your date of incorporation is 10 June, then the Annual Return needs to be in on or by 31 July.

Don’t forget Annual Financial Statements (AFS) must be submitted, in XBRL format, with the Annual Return. If the date for your Annual Return falls before you have finalised your current AFS, then submit last year’s AFS.

If you fail to submit an Annual Return, the CIPC will take this to mean your company is no longer active and will begin company deregistration proceedings – the last thing you need is to find your company effectively doesn’t exist so make sure you acquaint yourself with these new requirements and ask your accountant for advice in any doubt.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Important: SA’s rankings on the ease of doing business index, and an exciting new business registration platform

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In his recent State of the Nation Addresses, President Ramaphosa vowed to speed up economic growth. He has set several key milestones to measure how effectively he is putting South Africa back on a positive economic path, such as attracting R1.2 trillion in investment in five years (in less than two years well over half of this has been raised).

One of these milestones is to improve South Africa’s position in the “Doing Business Index” (often referred to as the “Ease of Doing Business Index”) which ranks 190 countries around the world – the higher up you are on this World Bank scale, the easier it is to trade in your country which will attract businesses to enter the local market.

Where South Africa stands   

The President has set the goal of South Africa climbing into the top fifty of the Index in the next three years. Currently we sit at number eighty-four and unfortunately slipped two places in the 2019 survey. In Sub-Saharan Africa we rank fourth behind Mauritius, Rwanda and Kenya.

How the Index works

It compiles several measurements for businesses like:

  • Ease of getting a construction permit. Here our ranking is 98.
  • Getting electricity where we are number 114.
  • Registering property – ranked 108.
  • Obtaining credit. South Africa is just in the top half at number 80.
  • Protecting minority investors – in this field we are ranked 13th mainly due to the excellence of our Companies Act.
  • Paying taxes which sees us at number 54.
  • Enforcing contracts, number 102.
  • Resolving insolvency which is not too bad at 68.
  • Cross border transactions where we are down at 145. This is something we are working on with our trading partners.
  • Starting a business which is disappointing as we are number 139.

A new online one-stop business registration platform

Clearly, there is quite a bit of work to do and one recent initiative launched by the President is the creation of CIPC’s “Biz Portal”. This is  a one-stop online platform whereby you as an entrepreneur can register a business, can register for tax, UIF and the Compensation Fund, register a domain name, open a bank account and get a BEE certificate. All for R175. The aim of the Biz Portal is that all these tasks can be completed in one day whereas it otherwise takes forty days to open a business in South Africa.

This will be a significant step forward in moving South Africa up in the Doing Business Index.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Crunch time for SA – The medium term budget policy statement and what it means to you

Logista_Nov2019_01“There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures.” (Shakespeare)

For several years commentators have been sounding alarm bells about South Africa’s steadily rising debt whilst economic growth has stalled. As the Minister himself put it: “Our problem is that we spend more than we earn. It is as simple as that”. On top of that State Owned Enterprises (SOEs) have been poorly led and even more poorly governed as President Ramaphosa recently said that R500 billion has gone missing due to state capture.

This has put our debt past 50% of GDP (from the low twenties a decade ago), nonproductive government spending has risen, salaries now account for 35% of state expenditure and low economic growth stifles tax collections. In addition, Eskom has received extra funding of R52 billion this year. As they say, something has to give.

There have already been consequences as two of the three major ratings agencies (Fitch and S&P) have downgraded South African debt to junk status and Moody’s (as we discuss more fully below) are closely watching.

South Africa is also in a delicate socio-economic position with rising social unrest, growing unemployment and it is recovering from state capture. Thus, drastic spend cuts or growth in SARS income are unrealistic. That leaves selling state assets as the most viable alternative to arresting the ongoing rise in our debt.

It is not just ratings agencies that have been anticipating the MTBPS but also business which could throw large resources into the economy if it sees that government is committed to turning around the slide of recent years.

So, how did the Finance Minister do?

The initial reaction to the MTBPS was one of disappointment, symbolized by the rand shedding 2.5% against the US dollar and bond yields dipping. It was not just that the Minister painted a picture of a sliding economy over the next three years but there were few specifics as to how the South African economy is going to get out of an increasingly nightmarish hole.

For example, Minister Mboweni was expected to provide some detail as to how Eskom’s debt (R450 billion) was going to be restructured but all he said was that Eskom must implement meaningful reforms before tackling its debt. In the Minister’s own words: “In addition to low growth, South Africa’s biggest economic risk is Eskom … Over the medium term and beyond, government will manage the massive risk to the economy and the fiscus associated with Eskom.”

The main indicators – bad news and good 

  • GDP was forecast at 1.5% for 2019 in the February Budget, it is now forecast at 0.5% for this year, rising to 2.4% in 2023.
    • Comment: This is disappointing as population growth is 1.6%, so in reality GDP will grow by 0.8% in 2023 and be negative this year.
  • Inflation will remain benign throughout this period staying in the 5.3% average.
    • Comment: As inflation hits the poor the hardest, this is good news.
  • Debt/GDP which is a key ratio for ratings agencies will progressively deteriorate, a function of low economic growth and rising costs. This is 56.8% for the current year and increasing to nearly 69% in 2023. This is before support to State Owned Enterprises (SOE) like Eskom and South African Airways.

Comment: If we look back a few years, government were saying that Debt/GDP would peak at around 50%. We have gone through that and are now looking at 70% and beyond. The nation is in danger of falling into a debt trap – rather like the consumer who, unable to borrow more money, finally maxes out his credit cards and spends most of his time paying off debt.

So, what does that mean for us?

The Finance Minister showed a bleak scene and clearly the government is struggling to get consensus as to how to address what is becoming a very serious problem. The Minister highlighted that in the next three years R150 billion has to be found either in tax increases or spending cuts. In the February budget he will give the nation concrete measures to be taken.

For the man in the street expect more tax increases in the February budget.

Moody’s and our junk status risk

On 1 November, Moody’s changed its outlook on South Africa from stable to negative. In a blunt statement, it gave the government notice that unless it comes up with “a credible fiscal strategy to contain the rise in debt” in the budget in February, Moody’s will most likely downgrade South Africa to junk status. That will trigger overseas financial institutions selling an estimated US$15 billion of South African bonds.

That would of course hurt us all and leave our nation, as Shakespeare put it, “bound in shallows and in miseries”. Let’s hope we dodge that one – on average it takes a country five to six years of hard slog to get out of junk status.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Businesses: Think strategically when cost cutting

Logista_Nov2019_02We all know times are tough and many companies are embarking on cost cutting exercises. Unfortunately, this is a necessary procedure but think of the impact on staff morale and the potential loss of productivity when undertaking cost reduction. You don’t want to end up leaving your business worse off.

A few tips

  1. Communicate effectively. Cost cutting is not a pleasant experience, so be open with staff – why it is necessary, how much you plan to save and how this exercise will make the business more sustainable.
  1. Be fair. If you plan to stop business class travel for some employees but keep it for senior executives think of the possibility of staff resentment and the potential for an “us versus them” situation to develop.
  1. Keep perspective. A company recently stopped funding junior staff’s cell phones. Not only did this cause widespread anger but the actual saving was too small to have a real impact on reducing expenses.
  1. Think it through holistically. In another example a business made significant cuts to travel expenses and used video conferencing for team members to communicate with each other. This reduced team ethos, effectiveness and productivity was lost.
  1. Think of the side effects. In another travel cost cutting scheme, staff were not allowed to use taxis. This, in effect, stopped travel after hours as staff then opted to travel during business hours. Thus, the company lost up to two working days a week when staff undertook business trips.
  1. Don’t skimp on contractors – such as not letting them use your canteen. They do important work for your company, so don’t put this at risk by treating them badly.

Use common sense as your guide when you undertake cost cutting.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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