CWB survey reveals potential for Cdn. SMEs to increase efficiency amid cash flow challenges

EDMONTON — On Jan. 22, 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).

“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.