Canada’s Business Barometer shows steady confidence, but wage and price hikes are slowing recovery

Short-term confidence has improved in all business sectors in Canada, including those that have been significantly affected by the pandemic. However, labour shortages and rising costs continue to hold businesses back from recovery.

According to the latest Canadian Federation of Independent Business (CFIB) Business Barometer, businesses in the hospitality sector saw the highest jump in short-term optimism, up by 16 points.

The three-month optimism index rose to 60.8, an increase of 0.7 points from March. However, the 12-month index dropped by 0.4 points to 64.9.

Simon Gaudreault, Vice President of National Research at CFIB said small businesses, especially in the hospitality sector are “feeling more confident” due to loosening of travel restrictions. But “many small businesses are still facing significant challenges such as inflationary pressures, high fuel and energy costs, and shortages of labour.”

In total, 38% of businesses said they were in a good shape, while 17% reported being in poor shape, a small improvement over March’s numbers. Hiring intentions continue their gradual upward trend, with 28% of businesses planning to add full-time staff and 11% saying they will cut back.

Pricing and wage plans continued to climb, with businesses expecting to increase prices over the next 12 months by an unprecedented 4.9% on average, while wage increase plans have reached 3.3%.

Additionally, one half of small business owners report that skilled labour shortages continue to pose a challenge for their return to normal sales, a third say that unskilled labour shortages are holding them back and a third report supply chain disruptions.

Fuel and energy costs (73%), wage costs (59%), and insurance costs (54%) were also the top cost constraints for small businesses in April.

Andreea Bourgeois, Director of Economics at CFIB said that high level of debt and shortage of products and labour may stall “small businesses recovery and their return to pre-pandemic levels of sales.”

Small businesses need to prioritise cash flow management to smoothly navigate rising prices as it may have a major impact on the business.

To get their cash flow processes in order, SMEs should focus on managing receivables and avoiding late payments from customers by adopting RIABU’s Virtuous Revenue Cycle (VRC). The VRC starts with communicating clear payment and service expectations from the begin­ning of every customer relationship and ensuring you interact with the customer at every stage of the cycle to prevent obstacles to late payment.

When the VRC is correctly employed, it ensures you are closer to your customers than your competitors and in a better position to identify potential issues and opportunities to get paid on time.

Get more tips on effective cash flow management from our book, Let The Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com