In an increasingly competitive market, small businesses face even more challenges when it comes to finding success — and even better, profitability. 

Findings from the Intuit QuickBooks Small Business Index Annual Report 2023 highlight the added pressures from rising interest rates and inflation — and the financial fallout. Now, three years out from the start of the pandemic,  small businesses’ monthly credit card spending is currently 18% higher in Canada, on average, than before the pandemic — equivalent to an extra $2,700 per business each month. At the same time, monthly repayments on credit card balances are 22% higher, on average, than before the pandemic.

And while the digital landscape continues to evolve, often forcing small business owners to keep up, data shows businesses that harness the power of digital technology are more likely to grow. More than half (63%) of Canadian small businesses that manage 8 or more areas of operations with digital technology report revenue growth. Among those who use digital tools in up to 2 areas only, this drops to 30%. 

From big data comes actionable insights for small businesses. Use these findings from the Annual Report to help set your business up for success. 

1. Be savvy when it comes to banking
2. Boost your credit score
3. Stay on top of cash flow
4. Build a relationship with an accounting professional
5. When possible, lower overhead expenses
6. Get a tight handle on inventory
7. Know when to adjust prices — and how to communicate pricing
8. Grow your customer base
9. Stay in the know with your competition 
10. Leverage the power of digital technology
11. Keep tabs on government policies

1. Be savvy when it comes to banking 

The importance of funding can never be overstated. Whether high growth or stability is the goal, financing is a lifecycle imperative to support sustainable, successful businesses. Being aware of the factors that can influence accessibility to funding is a must for businesses looking to expand or get through a temporary cash flow crunch. Choosing how and where small businesses choose to bank is a critical piece of the puzzle. 

Data from this year’s report shows that small businesses working with banks that were well-financed before interest rate hikes in 2022 received more funding than those working with less well-financed banks. Approaching banking decisions informed and empowered is crucial for small businesses.

• When searching for a bank, consider if it’s CDIC-insured, if it has a strong balance sheet, if its financial ratios are healthy, and whether its ratings are positive.
• Review different banking options — including credit card processing, automated bill payment, payroll processing, and instant payments.
• Ensure the bank is knowledgeable about your industry. 
• Understand annual percentage yield. 
• Review minimum balance. 
• Discuss fees. 
• Consider establishing a relationship with a banker who understands your business and can help your business grow.

2. Boost your credit score

A high credit score for small businesses increases financing power — from increasing the chance of receiving a small business loan, to being considered for larger amounts of credit, to keeping insurance rates low. 

• Make timely payments consistently — this habit reflects positively on credit scores and can demonstrate a business' stability. 
• Pay down outstanding balances — focus on accounts that have the highest interest rate, and then move down the line, paying off creditors according to the interest rate.
• Work with partners who report to the business credit bureaus — verify that the vendors you work with report payments; if they don’t for one reason or another, consider working with those who do.
• Keep credit accounts open — closing too many accounts can impact your score.
• Talk to your creditors — If you find yourself struggling with your accounts payable, let creditors know what’s going on with your business and make a good-faith effort to pay down your bills.
• Check your business’ credit score regularly — being informed helps you make better decisions as you steer your business forward.

3. Stay on top of cash flow 

Maintaining a healthy cash flow is a lifecycle imperative, and learning how to handle curveballs can be the key to small business longevity. Whether earmarking enough cash to cover overhead costs if payments are late, or to pay for unexpected expenses and emergencies, or to survive economic downturns, understanding how to build and protect cash flow is survival-critical for small businesses. 

With the recent inflationary surge, it’s easier to overestimate money coming in and underestimate money being spent. When prices are rising, it’s even more important to watch your cash flow closely. It provides the financial cushion necessary to avoid an overreliance on credit cards. 

• Know your fixed and variable costs.
• Monitor cash flow projections.
• Treat your cash-flow savings as a fixed expense.
• Make sure you create guidelines for tapping into your cash reserves.
• Decide whether to charge interest on late payments and clearly communicate all payment terms to customers.

4. Build a relationship with an accounting professional

Nearly half (47%) of small businesses in Canada, the US, and the UK say inflation is their number-one challenge. Paying an outsized or unexpected tax bill on top of rising costs can quickly deplete cash reserves and worsen financial strain. 

Part of the strategy for resilience and prosperity over the next year for small businesses includes developing or maintaining a relationship with an accountant or bookkeeper. More than 8 in 10 small businesses across all three countries agree that their accounting professionals have helped them reduce the impact of inflation on the business. 

When it comes to accurately keeping records updated on income, expenses, and deductions, hiring an accountant and outsourcing bookkeeping can save small businesses time and money. On average, small businesses estimate having an accountant saves them $54,000 each month. 

Additionally, with the advancement of technology and the pressures of economic ebb and flow, accounting professionals are stepping up to deliver the full scope of support for their clients with a more strategic role. More than 89% of accountants say technology is helping to free up more time to become an advisory partner and many use that time to help small businesses find their own productivity gains — often through technology that manages business processes more efficiently.

Working with an accounting professional comes with many benefits, such as having a strategic business partner advising on how best to plan for the below.

• How to connect systems and avoid duplication with better use of technology.
• How to hedge against inflation and protect cash flow.
• How to read financial statements and plan for the future.
• How and when to borrow money to support growth plans.
• When to hire and whether you might need an HR advisor.
• How to stay on top of changing tax and payroll laws.

5. When possible, lower overhead expenses

Small businesses aren’t alone in feeling the squeeze of inflation. Their suppliers are, too. 

Consider the following to help consolidate or lower overhead costs:

• Use a bidding system to get the best deal from vendors.
• Ask your vendors about early payment discounts. 
• Tighten up procedures and practices that are wasting time and money.
• Do a subscription audit and pull the plug on unused services.
• Cut unnecessary coverage from your business insurance — or shop around.

6. Get a tight handle on inventory

For small businesses selling products, inventory is cash-absorbent. Managing a small business’s supply chain efficiently is even more important when inflation surges because every penny coming in and going out counts. It’s important to understand when to buy in bulk to get ahead of price increases, and when to keep things lean. 

• Implement and monitor inventory tracking to prevent overstocking or understocking.
• Make sure your website is up to date and keep customers in the know about inventory.
• Take advantage of data analytics for optimization — product history, customer buying trends, product success, and failures. 
• If in doubt, get advice from an accountant or supply chain expert.

7. Know when to adjust prices — and how to communicate pricing

Knowing when to increase prices can be a daunting decision for small businesses. The rising cost of goods puts small businesses in the position of weighing staying afloat with potentially putting off customers. 

If the pinch of inflation has forced small businesses to up their prices, here are some strategies to help keep customers happy and stay competitive:

• Don’t catch customers off guard — announce price increases before they happen and focus on why and the quality of services/products.
• Experiment to find the right pricing that meets the needs of the business and keeps customers loyal.
• Create bundles and packages to sell more products to one customer.

8. Grow your customer base

Low customer demand remains the top challenge for 10% of small businesses. Positioning a small business’s brand in front of new audiences can be a challenge, but the reward can bring stability and growth. Expanding the customer base of small businesses trying their best to thrive can pave the way for success. 

• Attract new customers by incentivizing current customers to spread the word about your business — positive reviews are a trusted metric for brand trust.
• Solicit feedback from current customers to improve the customer experience.
• Build an email marketing list and create an email newsletter that showcases your personality. 
• Determine your digital marketing budget — and maximize it with a stellar website and social media presence.
• Host a contest or giveaway to announce new products and services.

9. Stay in the know with your competition

The advancement of technology and social media has put the world at consumers’ fingertips. In an ever-expanding market, one option has turned into hundreds. And just as rising inflation and interest rates have impacted small businesses, consumers are left to make hard decisions on where and how to spend their money. Facing stiff competition, 13% of small businesses indicate that low-price competitors are their top challenge. 

Staying in the know about how other small businesses offering similar products and services price and market themselves can help reveal blind spots in your own business and attract customers in the process. 

• Review pricing, customer support options, and rewards offered by competitors. 
• Read competitors’ customer reviews and learn more about what customers expect in your industry.
• Review content that gets the most engagement on competitors’ social media accounts
• Perform a SWOT analysis assessing competitors’ strengths, weaknesses, external opportunities, and threats to your business.

10. Leverage the power of digital technology

Now more than ever, digitization is critical for small business success. Despite surging inflation and interest rates, 3 in 5 small businesses that manage 8 or more areas of their business with digital technology report revenue growth — whereas only 3 in 10 businesses that use up to 2 apps report the same. 

High adoption of digital technology isn’t just supporting revenue — it’s supporting employment, too. One in 5 high adopters report workforce growth, but fewer than 1 in 10 low adopters report the same. 

By increasing efficiency, streamlining processes, and helping small businesses reach new audiences, digital technology is empowering small businesses with the tools they need to triumph.

• Embrace AI for efficiency — with 70% of small businesses agreeing that AI could help them compete with larger businesses, leveraging AI can help with everything from helping to inform decision-making, helping to get paid faster, reducing errors, and reducing labor costs.
• Automate business processes — this can include invoicing, payments, take management, and payroll.

11. Keep tabs on government policy

No matter where you operate, you’re impacted by government regulations and policies that determine how you start, run, and grow your business. There are likely hundreds of rules that impact your business, and to make matters more complicated, these policies are always changing. 

No one expects you to be an expert in government regulations (you’re already wearing a lot of hats), but there are efficient ways to keep tabs on government policy and compliance regulations. This can help protect your business from unforeseen changes. 

•  Work with an accountant — it’s their job to stay in the know on policies that could impact your business. 
• Follow the Government of Canada and Canadian Chamber of Commerce for the latest news on government policies and regulations for businesses.
• Build a cash reserve — changes or pauses in government policies could impact how you run your business or get funding. A rainy day fund can help carry you through unexpected hard times.

Visit the Intuit QuickBooks Small Business Index Annual Report hub for more about this year’s findings. 

Read more about actionable insights for policymakers from this year’s report.

Read more about actionable insights for accountants from this year’s report.