Sage Financial Literacy Survey Reveals That Canadian Small Business Continues To Struggle To Identify Key Costs
Coinciding with Small Business Week, Sage today released the findings of a survey of more than 500 Canadian small business owners to determine ‘financial literacy,’ by gauging the overall perceptions, knowledge and habits of small business owners with regard to financial management, resources and compliance. Conducted by Angus Reid Public Opinion on behalf of Sage’s Simply Accounting business, the survey succeeds a 2009 study also focusing on financial literacy.
The 17-question survey reveals that small businesses continue to struggle to identify the cost that affects their business the most. Among the 503 participants nationwide, 23 per cent responded they have yet to identify the cost that has the biggest impact on their business. Smaller businesses are more likely than bigger companies to have this issue.
“Although the economy is recovering and small businesses are slowly regaining confidence in their business prospects, as revealed by our recent Sage Global Business Index survey, Canadian small business owners continue to struggle with certain aspects of the financial management of their business, especially businesses with five or less employees,” said Nancy Harris, vice president and general manager at Sage Simply Accounting. “As a leading service and product provider to this business community, we know their pain points well. We recently released Sage Simply Accounting 2012, which was developed based on years of customer and partner feedback, to help small businesses gain better insight into the overall financial health of their business to manage their cash flow, costs and inventory.”
The survey results show there is a strong correlation between size of business and financial literacy.
“While we cannot make a direct correlation, the survey shows a relationship between the size of a business and degree of financial literacy,” said Jaideep Murkerji, Managing Director of Public Affairs, for Angus Reid Public Opinion. “Whether more financially literate business owners are inherently more likely to succeed in growing their business or having a larger business necessitates greater financial literacy, the parallel between size and financial literacy crops up repeatedly throughout the study.”
The survey reveals that over the past two years small business owners have increased their use of technology to handle the financial management of their business, both as a resource and as a tool. Small businesses are more likely to consult online resources, blogs or social media for advice now compared to 2009 (41% versus 35%), and less likely to turn to others in the same industry or former employers (27% versus 33%). Small business owners in Ontario are the most likely to use online resources (45%) while those in Western Canada are the least likely (36%). Additionally, 25 per cent of small business owners use mobile technology to manage their business-related activities with mobile online banking (79%) being the predominant activity.
Other highlights of the small business survey include:
- Forty-eight per cent of respondents reported cash flow as the most important aspect of the financial management of their business, followed by managing costs (39%) and invoicing (37%). Invoicing dropped considerably since 2009, when a larger percentage of small business owners (45%) cited it as one of the most important aspects of their business’ success.
- Respondents cited dealing with taxes (53%), managing sales and marketing (27%) and managing the finances of the business (26%), as their weakest areas. However, more financially literate respondents are more likely to report these areas of weakness as strength than less literate small business owners.
- Smaller businesses are more likely to point to managing costs as an important task, and larger businesses are more likely to report the importance of inventory management to their business’ success.
- The majority of respondents said they perform their business’ financial management tasks, including invoicing (81%), inventory management (79%), payroll (66%) and accounting (51%). Accounting, followed by payroll, is the financial task most likely to be outsourced (33% and 17%).
- Small business owners who use accounting software are more likely to be more financially literate than those who do not (85% versus 70%).
The survey was conducted May 17-23, 2011 and its results have a margin of error of plus or minus 4.4%, 19 times out of 20.