A survey from Xero, the global small business platform, has revealed that over half (53%) of small businesses in Canada “cited inflation as impacting their cash flow management in the last six months.”
Some businesses have been so heavily impacted “that nearly one-third (31%) of Canadian small business owners have been unable to pay themselves at times in the last 12 months.”
The Money matters: Navigating the impact of economic conditions on the cash flow of Canadian small businesses report “surveyed over 1,000 small to medium-sized businesses across Canada about the current state of payments and how economic factors in the country were impacting their cash flow management, future outlook, and mental and physical health.”
It revealed that “a majority (54%) of small businesses have increased their prices in the last 12 months to mitigate cash flow challenges.”
Faye Pang, Canada Country Manager at Xero, said:
“The Money matters report reinforces the importance of effective cash flow management for Canadian small businesses and their owners. With many small businesses facing the challenges of inflation head on, having access to tools that can help simplify the cash flow process is essential to weathering difficult economic times and sustaining growth.”
The report showed that “managing cash flow is a priority for a majority (88%) of Canadian small businesses. Surprisingly, small businesses showed no difference in how they prioritized cash flow management, regardless of whether they faced cash flow challenges in the past 12 months or not.”
However, if small businesses noticed inflationary pressures “in the past six months, cash flow management became a bigger priority, indicating that the anticipation of inflationary pressure is more impactful than the cash flow challenges they cause.”
The survey also revealed “that cash flow issues have had significantly negative effects on small business owners’ emotional and physical health, including feeling of stress (54%), anxiety (43%), having trouble sleeping (35%) and losing time with friends or family (27%).”
Despite the evident challenges that Canadian small businesses are facing, they remain optimistic, with 78 percent of Canadian small businesses reporting some level of confidence in their financial wellbeing. More than two in five (43%) Canadian small business owners describe themselves as reasonably upbeat and reassured, and more importantly, a third (35%) say they are super confident in their financial well-being.
The findings from the report also showed “that the time spent on cash flow monitoring varies for businesses of different sizes, with two in five (42%) sole traders only spending less than one hour a week, and another third (33%) spending between one to two hours per week.”
When it comes to preferred payment formats, cash and credit cards remain the key method of collecting payment “with 61 per cent of Canadian small businesses saying they use each.”
Research methodology
This report is based on “the collated responses from an online survey conducted in English only, with 1033 small to medium sized businesses (with up to 50 employees) across Canada, recruited from one online market panel.”
Responses were collected by Insights Exchange between June 29 – July 7 2023.