Small business COVID-19 survival guide; Some ideas to help your business survive the lockdown & COVID-19 pandemic

Coronavirus (COVID-19) has left a few countries with no option but to lockdown in order to flatten the curve of its spread and person to person infections. Many businesses have been forced to shut down or to request their employees to work remotely. Many questions have been asked regarding how businesses and individuals can survive during this period. From a personal point of view, we have had to cut down on non-essential costs, travels and meetings. We have also had to reinforce our culture of working from home. But, what do the lockdown and coronavirus mean for you and your business? What are the things that you need to be doing to respond proactively or otherwise? Let’s look at a few considerations:

 

PERFORMANCE CONTRACTS: 
You and your business may have entered into contracts that require you to perform your obligations to the contracts while the country is on lockdown. You may still be able to perform your obligation in certain circumstances. But, you may also not be able to perform your obligations altogether. Some of your suppliers may also fail to deliver on their obligation to supply goods or services during the lockdown. Here are a few considerations:

  • Try your level best to keep things running so that once we have beaten this virus, you have something to run back to;
  • Check that your contracts have a clause that deals with non-performance as a result of a superior force (natural cause or unforeseen circumstances). To be legally sound, the non-performance must have a direct link to the coronavirus.
  • Assess your ability, for now, and in the future, to continue providing a service. The key question to answer here is if you are affected by the coronavirus or not.
  • Notify any other party that you have contracted with that may be affected. In doing so, set out:
    • The clause that deals with non-performance due to forces of nature or unforeseen circumstances.
    • The impact that COVID-19 has had on your business.
    • How the COVID-19 and lockdown is affecting your business
    • The steps you are taking to mitigate the effects of coronavirus and lockdown
    • How long you think the effects may have an impact on your business and ability to deliver on your contracts
    • Assess whether your business will be affected by other party’s inability to deliver/supply

 

TAX BREAKS: 
Some businesses’ cash flow will without a doubt be impacted during the lockdown or until the COVID-19 pandemic is cleared. As a result, the government has offered that companies with a turnover of R50 million or less may delay PAYE payments by 20% over the next four months and a portion of their provisional tax payments over the next four months. There will be no penalties or interest on this tax break. Two important things to note here, there is yet to be an announcement of how this will work and there was no mention of a similar incentive on VAT. For VAT, we think this is because VAT is a third party collection tax. As good practice, even in good times, businesses should always put aside the VAT collections aside and this is practically not the business’ money.

The summary of what is applicable to you is as follows:

  1. You can delay your PAYE payment by 20% from 1 April 2020 till 31 July 2020, meaning you will be paying 80% of your normal bills during this time.
  2. The deferred PAYE liability (the delayed 20%) must be paid to SARS in equal instalments over the six-month period commencing on 1 August 2020, i.e. the first payment must be made on 7 September 2020.
  3. This only applies for tax compliant taxpayers whose turnover is not more than R50 million

For provisional tax:

  • You are allowed to delay a portion of your provisional tax payments for a period of 12 months, from 1 April 2020 to 31 March 2021
  • You can pay 15% of the provisional tax due on the first provisional tax submission and 50% of the estimate tax liability (therefore 65% at second provisional tax) and
  • the rest on the third provisional tax payment.
  • This is also only available to tax compliant businesses.

 

Example: 
Company B has a 28 February 2021 FYE, meaning that its first provisional tax payment will fall during the temporary period. As such, the first provisional tax payment (due by 31 August 2020) will be R120 000 (15per cent of its estimated total tax liability of R800 000 for the year) instead of R400 000, allowing temporary relief of R280 000. As a further relief measure,  only 50 per cent of the estimated tax liability (R400 000) will be due by 28 February 2021, so that the cumulative total tax paid at that point is 65 per cent of the estimated total tax liability. The remaining balance of R280 000 (35 per cent of estimated tax liability) will be due by 30 September 2021 in order to avoid interest charges.

 

STRATEGIC THINKING AND PLANNING: 

If you find yourself at home and not able to work, this is a perfect time for strategic thinking, refocusing, self-development, and personal reflection. Review your plans and goals for the business as well as your personal goals. If you have a plan, review it and make sure it is in good shape to respond to the changes that will and are happening to business during this pandemic.

 

STICK WITH FAMILY AND CALL UP SOME FRIENDS:
If there is one thing that coronavirus has taught us, it is going back to the basics of the things that really matter like being at home with friends and family. It taught us that at the end of it all, it is your home, family and friends that keep you safe. Be around those you love. Remind them that you love them.

It is important to also note that humans will always have an inherent feeling of belonging and being loved. Recently, I have had to arrange that my sister comes and stays with me until the lockdown is over. This is because she stays alone in Bantry Bay and I was worried about what loneliness and isolation might do to her mental wellbeing. So, you may do the same. Call those loved ones you know will be along and ask them to move in with you. If this is not possible, make it a point to give them a call now and then. Stay connected even if it means doing so via social media platforms.

 

PREVENTING DEPRESSION: 

  1. Read positive news and positive literature
  2. Call friends and loved ones regularly
  3. Make use of social media to stay in touch with your loved one
  4. Speak to someone if you are stressing
  5. If you believe in God, read your bible and pray often. Call your pastor or leaders if you need spiritual support. Find out if your church leaders will be live streaming sermons or teaching to support and strengthen you during this time.
  6. Avoid watching negative news or social media feeds.
  7. Exercise.
  8. Get more sleep
  9. Avoid caffeine, nicotine and alcohol.
  10. Help others to deflect your own stress.
  11. Find reasons to be grateful.
  12. Change your story; you are a survivor, not a victim.
  13. Learn to say “no.”
  14. Manage your time effectively and efficiently.
  15. Identify and avoid stressors; external and self-imposed.
  16. Take regular short breaks.

SUPPORT LOCAL AND YOUR FAVOURITE SMALL BUSINESSES: 

Do not watch and let your favourite small businesses die. Support them in any way possible. If you are a big business being serviced by a small business, do not stop paying for their services. If you cannot use their services during this time, find other ways to support them with some cash flow until this tide is over.

SHOULD YOUR BUSINESS STILL PAY WAGES/SALARIES? 
Businesses’ most important asset, without which there is no business. Therefore, it is important that your business continues to support its employees during this time. There are a few considerations and important things to note here.

  • If you are planning on short-term layoff, apply for the UIF for your employees.
  • If you can still pay your employees, please do so. It is the right thing to do, taking care of your employees
  • If necessary, you as the business owner may have to decide not paying yourself a salary
  • You may need to have a chat with other executives and ask them to take a pay cut until this tide is over.
  • Employees who fall ill at work will be paid via the compensation fund. If not on the compensation fund, what other insurances does your company have? Please do note that it is a requirement for companies with employees to register for the Compensation fund.
  • If your employees are able to still work remotely, this means that you can still pay them for their full wages
  • Do not force your employees to take leave. The general rules of the labour act still apply
  • There is a proposal being discussed by the government under which employees will receive payment through the Temporary Employee Relief Scheme (TERS.) This will enable companies to pay employees directly during this period and avoid retrenchments. More details from the government will make this clear.
  • A tax subsidy of up to R500 per month for the next four months will be provided for private-sector employees earning below R6 500. This is made available under the ETI (employee incentive scheme)
  • Where possible and applicable, process UIF claims for your employees. The necessary forms are attached as annexures to this document. The most important one being the U2.8 form which must be completed by the employee’s bank, and the employee then submitted to the department of labour. If you plan on submitting this form and other UIF form, you will have to get your employees to complete and sign the U2.8 Form before the lockdown is effective.
  • If in doubt, consult a labour expert for clarity on certain issues.

TAKE CARE OF YOUR EMPLOYEES: 
Your employees are your most important asset. Take good care of them during this time by:

  • Paying for their COVID-19 testing if you can
  • Calling or texting them to tell that you care
  • Instead of retrenching them, find out if your employees are willing to take a salary cut or unpaid leave. You may need your skilled and experienced staff when all this is over.
  • If you can, pay them a salary advance if there is a genuine need for an advance.
  • If the workload for your company has reduced, maybe this is a time to upskill your staff. Provide online training on the areas that are critical to your business.

CASH FLOW: 

  • Negotiate with your landlord for a rent discount or payment holiday. If you can continue working from home, consider cancelling your small office lease.
  • Negotiate for a payment holiday from some or all of your key software providers. We did this and we were offered a billing holiday up to June 2020.
  • Identify flashy software that you do not use and consider if you can cancel the subscriptions.
  • Offer early settlement discounts to your clients to encourage them to pay you early.
  • Ask your banker if they are facilities that you can tap into. Find out if you can take a payment holiday on some of these facilities. Better still, find out if you have credit shortfall insurance that can kick in when you cannot pay.
  • Ask your staff for innovative ways of doing things or saving money. They always have some good ideas.
  • Delay salary increases or bonus payments.
  • Use this time to review processes and systems to identify where they can be improved.

PRODUCTIVITY & COMMUNICATION TOOLS:

  • Crowdcast
  • Trello for project management
  • Asana for project and task management
  • Monday.com for project and task management
  • Loom for short videos
  • Microsoft teams for meetings and video calls
  • Zoom for video calls and group meetings
  • Skype
  • WhatsApp
  • Slack for internal communications and you can create several channels on this platform
  • Google Meets
  • Google Drive and Google Suite
  • Xero for invoicing and accounting
  • Simplepay for managing payroll and UIF submissions

FINANCIAL ASSISTANCE: 
The government has also launched a debt relief facility aimed at helping businesses that are impacted negatively by these effects of coronavirus. These funds can be accessed by making an application on this website: http://www.smmesa.gov.za/. Interest rates for these facilities will be at prime minus 5% and the fund can be used to buy Raw materials, labour, and operational costs.

Qualifying criteria: 

  • The business which is negatively affected due to the coronavirus pandemic
  • The company must be 100% owned by South African Citizens
  • The company must be 51% black-owned
  • Employees must be 70% South African
  • Priority will be given to businesses owned by women, youth and people with disabilities
  • Be registered and compliant with SARS
  • Be UIF compliant
  • Registration on the national SMME database is via www.smmesa.gov.za

Funding requirements: 

  • Proof that the business is negatively affected by COVID-19 pandemic
  • Complete the online application form
  • FICA documents
  • Certified ID copies of the directors
  • 6 months bank statements
  • Latest Annual financial statements or latest management Accounts not older than three months from date of application (balance sheet) where applicable
  • Business Profile
  • 12 months of cash flow projections (with clear assumptions)
  • Copy of lease agreement or proof of ownership
  • Facility statement of other funders – where applicable
  • A detailed breakdown of funds including salaries, rent etc

There are questions about whether individual banks will provide further debt relief programs.  So far, no other banks except Standard bank have announced some debt relief measures. All we know at this point is that the President has had discussions with banks and the banks have been allowed to discuss a uniform debt relief structure for their clients without facing consequences from the Competition Commission. So, my view is that we should give banks a day or two to allow them time to make official announcements about whether they will provide any debt relief measures (pause bond payments, car repayments, loan repayments e.t.c.)

MARKETING: 
When trouble hits, as it has, one of the first things businesses forget is marketing. However, stopping your marketing will not produce positive results after the lockdown. This may manifest in the reduction of leads and customers when the lockdown and pandemic are over. So, for now, make sure you are prioritising client lead follow-ups, doing your non-negotiable business development activities:

  • Keep your clients engaged on all platforms that you have a presence on.
  • Provide free advice on the core of your services and tips on how to survive the lockdown and pandemic.
  • If you can, text or call your clients to make sure they are well. Show them you care. Contact them and find out how your business and contracts with them will be affected, even if it turns out the lockdown continues until after the official 21 days.
  • Communicate clearly, internally between the team and externally to your community using platforms that your community reaches out to you.
  • Do not cancel your events if you can Livestream these.
  • Do not cancel any client meetings if you can hold digital meetings.
  • Update your website with operating hours. If your business is listed on Google, also update your operating hours there.

KEEP SELLING: 

  • Can your business offer vouchers that can be redeemed after the lockdown or later when things have normalised?
  • Can you sell these vouchers at a discount?
  • Can your business absorb delivery fees once the lockdown and/or pandemic is over?
  • A lot of people are spending their time on social media. Are you maintaining your presence there? Are you telling them how you can help them solve their challenges?
  • Are you able to lower your prices to encourage local customers to use your products or Air BnB?
  • Keep in touch with your existing and potential clients. Find out if they have new needs that you can help solve.

GENERAL TIPS AND GUIDELINES: 

  • You may experience a lot of downtimes. Use it wisely
  • You may experience a lot of video calls. Make sure your internet connection and speed is right.
  • If you rely on your mobile, it is advisable to get a data contract.
  • If you will be using your laptop for video calls make sure your webcam works properly.
  • Find a quiet spot in your house where you can work and make calls.
  • Make sure that everyone at home understands that you may be working and making calls so that they do not disturb or distract you.
  • Eskom has said it does not see load-shedding happening in the next few days, but make sure your laptop is fully charged and you have data/connectivity backups. If you can, get a UPS system.
  • Know the basics about COVID-19, how it spreads and what the symptoms are.
  • Do not rush to deplete your emergency funds and savings
  • If needed get short term funding to see your business through the lockdown and until COVID-19 is cleared
  • If you cannot work in your business, work on your business. Review your model and products and ensure they still address your clients problems.
  • Look at what you sell and ask yourself if this will still be sellable after COVID-19. If not, redesign your products.
  • Have a relook at your website. Does it specifically address the problems that you solve for your clients? Is there a definite and powerful call to action?
  • After COVID-19, if you want to kill your business, grow too fast and everywhere. Focus on people in your business and on being profitable. Also, save at least 5% of your cash turnover for a rainy.
  • Do everything you can to keep generating leads for your business. Do not wait until the economy has recovered.
  • Get like-minded business people together on an online call or group chat to share ideas of how you can survive during this time.

Do you need help navigating through these difficult times? Please get in touch with us.

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