If 2020 taught us anything, it’s that we live in an unpredictable world. Who could have anticipated that a global pandemic would force us to rethink the way we work, run our businesses, and live?
COVID-19 has had an impact on all sectors of society, and small businesses are no exception. Those that made it through the last year have zeroed in on a few key things. They embraced technology and the ability to gain real-time access to financial data and insights, which allowed them to make informed decisions that helped keep their operations afloat. This willingness to embrace digital resources has helped Canada’s small businesses future-proof their businesses. The good news is, you can do it too.
Prepare for financial instability
Statistics Canada found that small businesses across the country were more likely than bigger companies to have experienced a pandemic-related decrease in revenue and to have less liquidity. They were also more likely to be unable to take on more debt, and more likely to be considering bankruptcy in the pandemic economic environment. In an independent national survey conducted by Xero among 800 Canadian small businesses, it’s not surprising that 38% identified being better prepared for financial instability as their primary business goal for 2021.
Since the start of the pandemic, small business debt in Canada has soared to $135 billion. The Canadian Federation of Independent Business warns that as many as 181,000 businesses in the country are at risk of permanent closure. That’s one in six businesses, representing a loss of 2.4 million jobs.
With every crisis, however, comes opportunity. To survive, businesses must take a proactive, rather than a reactive approach—and they always need to be prepared for times of financial uncertainty.
What can you do to future-proof your business? Think digital. The pandemic has accelerated the speed at which businesses have adopted new technologies. Companies that have embraced e-commerce, for example, are set up for success. Last July, Statistics Canada reported a whopping 110.8% year-over-year increase in retail e-commerce sales between May 2019 and May 2020.
Future-proofing goes beyond simply setting up an online store and accepting digital payments. Consider going digital on the back end, too. Using cloud-based services such as Xero’s cloud-based accounting software platform can help small business owners automate and streamline their financial
operations. Let’s face it: do you really want to spend time and energy poring over receipts and spreadsheets?
Cloud-based accounting platforms—and value-added services like spending analytics—can provide you with real-time access to your financial information, so you can keep a close watch on your cash flow. Maintain a running balance sheet and keep your financial statements up to date and you’ll always have your thumb on the pulse of your business. When you have a clear picture of how much you’re spending, and how you can better manage your expenses, you can get back to doing what you do best—running your business.
Make informed decisions
The importance of making informed decisions can’t be overstated. Research has shown that many entrepreneurs base important decisions on nothing more than their own instincts. However, a data-driven approach is a better way of future-proofing your business. That means reviewing important insights like your company’s financial reports and data, as well as paying attention to customer feedback, to inform the actions you need to take to improve your operations.
Making informed decisions also offers a gentle reminder that, despite the narrative around being a small business owner or entrepreneur, you don’t always have to go it alone. While platforms like Xero can save you time and streamline your operations—while providing you with those all-important real-time financials—nothing beats a human connection. If you need help getting the lay of the land in an ever-shifting economic landscape, seek the expertise of a trusted advisor, like an accountant or bookkeeper.
Can you ever fully future-proof your business? The short answer is no; not as long as we continue to live in an unpredictable world. COVID-19 has been a global disruption of historic proportions, but you can be sure it won’t be the only turmoil your business will have to ride out. By embracing the full potential of technology and cloud-based solutions, you can keep a tight rein on your financials and set yourself up to thrive—even when the world goes sideways.