Cost Cutting Impact Calculator NZ 2026/27
When cash is tight the instinct is to cut the biggest number first, and that is frequently the wrong move. A cost line can carry a large monthly saving and still deliver almost nothing in the year you need it, because the cut costs money to make and takes months to take effect. This page ranks proposed cuts by the cash they actually put in the bank over twelve months, after subtracting the one-off cost of making them and allowing for the lead time before the saving starts. It also asks the question most cost cutting exercises skip, which is what each cut does to the ability to earn. Reducing a software subscription nobody uses is free money. Reducing advertising, sales capacity or the people who deliver the work is not a saving at all, it is a trade, and the page makes you put a number on the revenue side of that trade rather than leaving it comfortably unstated. The output is a ranked order, a payback period for each cut, and a net annual benefit that nets the revenue consequence off the headline saving. Cut in the order the page suggests only after reading the revenue at risk column, because the cut that delivers the most cash is sometimes the one that does the most damage.
Twelve month net cash = monthly saving × (12 − lead time months) − the one-off cost. A cut with a four month lead delivers eight months of saving in the first year, not twelve.
Payback = lead time + (one-off cost / monthly saving). Where there is no one-off cost this is simply the lead time.
Annual saving = monthly saving × 12, which is the steady-state figure from year two onward once the lead time and one-off cost are behind you.
Revenue at risk is your own estimate, entered per line. It is converted to a profit effect using the gross margin, since losing revenue costs you the margin on it rather than the whole amount.
Net annual benefit = total annual saving − (revenue at risk × gross margin).
Ranking is by twelve month net cash, descending, because that is what a business under cash pressure actually needs. It deliberately does not weight the revenue at risk, since only you can judge whether a given revenue consequence is acceptable.
Assumptions: the cut is permanent, the saving is realised in full from the end of the lead time, and the revenue consequence arrives evenly. Real cuts often leak, with a portion of the cost reappearing elsewhere.
Not financial or employment advice. Last verified: .
Ranked by cash actually delivered
| Cut | Save/mo | Cost | Lead | 12mo cash | Payback | Revenue risk |
|---|---|---|---|---|---|---|
| Advertising and marketing | $2,600.00 | $0.00 | 1 | $28,600.00 | 1.0 | $45,000.00 |
| Contract and casual labour | $2,760.00 | $0.00 | 2 | $27,600.00 | 2.0 | $28,000.00 |
| Software subscriptions | $980.00 | $500.00 | 1 | $10,280.00 | 1.5 | none |
| Vehicle fleet | $820.00 | $2,500.00 | 3 | $4,880.00 | 6.0 | $6,000.00 |
| Premises (sublease part) | $1,850.00 | $12,000.00 | 4 | $2,800.00 | 10.5 | none |
| Total | $9,010.00 | $15,000.00 | $74,160.00 | $79,000.00 |
Ranked by twelve month cash, not by monthly saving. Read the revenue risk column before working down the list.
Headline saving against cash delivered
| Total monthly saving once every cut lands | $9,010.00 |
| Annual saving at that rate | $108,120.00 |
| Less one-off costs of making the cuts | $15,000.00 |
| Less saving lost to lead times in year one | $18,960.00 |
| Cash actually delivered in twelve months | $74,160.00 |
| Shortfall against the headline figure | $33,960.00 |
What the cuts cost you in revenue
| Annual revenue put at risk | $79,000.00 |
| Gross profit lost on that at a 40% margin | $31,600.00 |
| Annual saving from the cuts | $108,120.00 |
| Net annual benefit | $76,520.00 |
| Cuts that risk no revenue at all | $33,960.00 |
The last line is the total annual saving from cuts you marked as risking nothing. That is the portion you can make without any trade at all, and it is where to start.
The Biggest Saving Is Rarely The Best Cut
Cost cutting exercises usually start with a list sorted by size. That produces the wrong order, because a monthly saving is not cash until the lead time has passed and the cost of making the cut has been recovered.
On the worked example, subleasing part of the premises saves $1,850.00 a month, the second largest saving on the page. It costs $12,000.00 and takes four months. Its twelve month cash contribution is $2,800.00, which ranks it dead last. Meanwhile advertising, at $2,600.00 a month with no cost and a one month lead, delivers $28,600.00.
Same exercise, completely different order, and only one of the two orderings helps a business that needs cash this quarter.
Worked Example: $108,120 That Delivers $74,160
Five cuts total $9,010.00 a month, which annualises to $108,120.00. That is the number that gets presented at the meeting.
Subtract $15,000.00 of one-off implementation costs. Subtract another $18,960.00 of saving lost to lead times, because a cut that takes four months to land only delivers eight months of benefit in the first year. What actually reaches the bank in twelve months is $74,160.00, a shortfall of $33,960.00 against the headline.
The headline is not wrong, it is just describing year two. If the problem is a cash shortage now, year two is not the relevant question.
Then There Is What The Cuts Cost You
Three of the five cuts put revenue at risk, totalling $79,000.00 a year. At a 40% gross margin that is $31,600.00 of gross profit that will not arrive.
Netting that against the $108,120.00 annual saving gives a net annual benefit of $76,520.00. Still clearly worth doing, but meaningfully less than the headline, and the difference is entirely made up of consequences that were foreseeable.
The figures in that column are yours rather than the calculator's. No tool can tell you what halving your advertising does to your pipeline in nine months. But entering zero because it is difficult to estimate is how businesses cut their way into being smaller businesses, and then cut again.
Start With The Cuts That Risk Nothing
The most useful line on the page is the total saving from cuts marked as risking no revenue at all: $33,960.00 a year on the worked example, from software and the premises sublease.
That is money the business can stop spending without giving anything up. Unused licences, duplicated subscriptions, space that is not needed, over-specified vehicles, insurance covering assets long since sold. Every business accumulates these, and they are almost always worth more than owners assume before they look.
Only once that pool is exhausted does the conversation need to move to cuts that trade capacity for cash, and by then the amount that still has to be found is usually smaller.
Cutting Capacity Is A Trade, Not A Saving
The distinction that matters is whether a cost line supports the ability to earn.
Advertising, sales capacity, and the people who deliver the work are capacity. Reducing them reduces what the business can produce or sell, and the revenue consequence usually arrives one to two quarters later, well after the saving has been banked and congratulated. That delay is what makes these cuts feel successful at the time.
Contract and casual labour is the interesting middle case. It carries $28,000.00 of revenue at risk, which at a 40% margin is $11,200.00 of gross profit, against an annual saving of $33,120.00. The cut is still clearly worthwhile on those numbers, but note the correct comparison: gross profit lost against the saving, not revenue against the saving. Comparing revenue to a cost saving overstates the damage by the whole of the variable cost you no longer incur.
Cut Or Borrow?
Cutting is right when the cost base is genuinely too high for the business's size. Borrowing is right when the business is sound and the timing is wrong. Getting the diagnosis backwards is expensive in both directions: borrowing to sustain an unaffordable cost base delays the reckoning at interest, and cutting capacity to bridge a temporary gap makes the recovery slower.
Our Business Stress Test Calculator shows whether the revenue floor is the problem, and our Business Debt Restructure Calculator prices the borrowing alternative. If the answer is that the business cannot fund itself at normal cost levels, the issue is pricing, and our Minimum Price Calculator is the better page.
Related NZ Business Cost Calculators
- Business Stress Test Calculator: how far these cuts move your revenue floor.
- Redundancy Pay Calculator: the one-off cost when a cut involves staff.
- Margin of Safety Calculator: headroom before break-even.
- Overhead Recovery Rate Calculator: what your overhead needs to recover.
- Business Health Check Calculator: whether costs are actually the weak dimension.
How to decide which business costs to cut first
- List the cost lines you are considering. Enter the current monthly amount for each, and the percentage you propose to cut. Be realistic about the percentage rather than aspirational.
- Add the cost of making the cut. Redundancy, contract break fees, lease exit costs, or the cost of replacing a service. A cut that costs money up front delivers far less than its headline saving in the first year.
- Add the lead time in months. Notice periods, contract terms and lease clauses all delay the saving. A cut that takes four months to take effect only delivers eight months of benefit in the first year.
- Estimate the revenue each cut puts at risk. Cutting advertising, sales staff or capacity has a revenue consequence. Enter an honest annual figure, or zero where the cut genuinely does not affect the ability to earn.
- Read the ranking by twelve month cash. This orders the cuts by what they actually deliver, which is frequently a different order from the headline monthly saving.
- Check the revenue at risk before acting. The cut that delivers most cash is sometimes the one that does most damage. Read both columns together rather than working down the ranking blindly.