New survey data highlights potential for Canadian SMEs to increase efficiency as 60 per cent face cash flow management challenges

More than half (60 per cent) of businesses believe that they will struggle to survive if they they do not embrace digital technology

EDMONTON, AB, Jan. 22, 2024 /CNW/ - Today, Canadian Western Bank (CWB) released its new study: Modernizing cash flow management, how technology supports growth among Canada's small and medium-sized businesses. The report reveals that almost half (42 per cent) of small and medium-businesses (SMEs) in the agriculture, manufacturing, transportation and professional services industries continue to use manual processes to manage their cash flow. Manual tools, such as spreadsheets, paper records, and calculations, are especially prevalent among professional services and agriculture businesses, small businesses with a single employee, and businesses that generate less than $500K in revenue.

The majority of businesses (60 per cent) reported ongoing challenges in managing their cash flow, with 18 per cent expressing a challenge in tracking expenses, revenue, and generating accurate forecasts. The study highlights a lack of technology and tools for automated and efficient money management as a common weakness in cash flow management across the industries surveyed.

Key survey findings:

• Most businesses (60 per cent) have experienced challenges in managing their cash flow, with delayed invoicing and payments (30 per cent) and managing accounts receivable/payable (26 per cent) being the most common issues.
• The top three reasons given for a business to invest in new software have been identified as: improving productivity (32 per cent), it's better for managing and analyzing data (30 per cent) and creating efficiencies (28 per cent).
• Of those who do not currently use cash flow management software, nearly half (46 per cent) would invest in it knowing it could help improve financial processes for their business.
• Currently, almost half (42 per cent) of SMEs manage their cash flow manually (using spreadsheets, paper records, and/or manual calculations), particularly small businesses with a single employee and businesses with revenues of less than $500K. Just over a third (36 per cent) use accounting software and 26 per cent use banking tools.
• Businesses are more likely to feel digital technology used by the financial institution they employ for business banking services has either helped (33 per cent) or had no real impact (45 per cent).

The four business sectors surveyed show that two-thirds (66 per cent) believe it's important to improve cash flow management efficiency. While 56 per cent believe that digital technology is pivotal to their growth, they also acknowledge (71 per cent) that it can improve efficiency in their business. Smaller businesses, as well as those in professional services, do not see the importance of improving their cash flow management efficiency. This is despite clear indications that complementary software and technology can simplify and automate manual, time-intensive back-office systems.

Key industry findings:

• Manufacturing industries are significantly more likely to have experienced some challenge managing their business' cash flow (83 per cent) compared to other industries.
• Two-thirds (66 per cent) agree it is important that their business improves its cash flow management efficiency; 27 per cent find it very important.
  • Those in professional services are significantly more likely to be very satisfied with their business' cash flow management (42 per cent vs. 28 per cent among all other industries). Larger companies (earning $500K or more) tend to be somewhat satisfied (55 per cent vs. 40 per cent of those with lesser revenue).
  • Professional services and businesses with generating less than $500K in revenue are less likely to agree it's important to improve its cash flow management efficiency; however, those in manufacturing and transportation believe it's very important.
• Manufacturing industries are more likely to use software to manage cash flow compared to those in agriculture or professional services, particularly for inventory management and customer relationship management. Agriculture businesses are more likely to use agricultural-specific management software and less likely to use payroll automation software.
  • Payroll automation is used more by companies that create higher revenue ($500K+); these companies are also more likely to use many different types of software.

Based on the data, there are three key desired outcomes among small and medium-sized businesses that use technology in these industries: improve productivity (32 percent), better manage and analyze data (30 per cent) and create efficiencies (28 per cent).

CWB executive and expert quotes:
"Leveraging data and technology, in combination with advice from a financial services partner, can help businesses relieve cash flow and operational challenges. However, many companies may not be positioned to benefit from modern cash flow management software or a strong financial services relationship, and should explore the advantages of combining data analysis with human expertise for improved business outcomes." Stephen Murphy, Group Head, Commercial, Personal and Wealth at Canadian Western Bank.

"It's not uncommon for some industries, particularly agriculture, to manually manage their cash flow. The nature of the industry requires it because the factors are truly ever-changing. However, combining automation with manual processes can provide stability when unpredictable events impact cash flow. Successful producers will have the tools and advice in place to ensure they're buying their inputs and selling their products at the best possible price." Trevor Sproule, Assistant Vice President and Head, Agriculture Banking at Canadian Western Bank.

"If you can reduce the amount of time, you can increase the amount of money. For the business owners I work with, the value of technology and automation is equal to the amount of time and money they can put back into their company. A good financial partner should complement a business's cash flow management efforts by providing industry insights and analysis that allow for timely and informed decisions that benefit the business." Trevor Palmer, Assistant Vice President, at Canadian Western Bank.

About Canadian Western Bank
Canadian Western Bank (CWB) is the only full-service financial institution in Canada with a strategic focus to meet the unique financial needs of businesses and their owners. We provide nationwide full-service business and personal banking, specialized financing, comprehensive wealth management offerings, and trust services. Our teams deliver a uniquely proactive and differentiated level of service to clients in targeted industries where we have deep expertise. Clients choose CWB for our highly personalized service, specialized expertise, customized solutions, and faster response times. Learn more at cwbank.com.

About Leger:
Leger is the largest Canadian-owned market research and analytics company, with more than 600 employees in eight Canadian and US offices. Leger has been working with prestigious clients since 1986. For more information: leger360.com.

About the study:
These are the findings of a survey conducted by Canadian Western Bank (CWB) from September 27^th to October 13^th, 2023, using the Leger online portal. As an online survey, 501 owners and decision-makers of small and medium-sized businesses within professional services, manufacturing, transportation and warehousing and agriculture within English Canada were surveyed. Leger's online panel has more than 400,000 members nationally and has a retention rate of 90%. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, though, a probability sample of 501 respondents would have a margin of error of ±4.4%, 19 times out of 20. Stringent quality assurance measures allow Leger to achieve the high-quality standards set by the company. As a result, its methods of data collection and storage outperform the norms set by WAPOR (The World Association for Public Opinion Research). These measures are applied at every stage of the project: from data collection to processing, through to analysis.

SOURCE Canadian Western Bank

or to book an interview with Stephen Murphy, Group Head, Commercial, Personal & Wealth please contact: Marcus Miller, Manager, External Communications, Client Solutions, [email protected], 780.717.4001