Manufacturers plan for uncertain cash flow in 2020: survey

MISSISSAUGA, Ont. — What makes some companies better at exporting than others? As we enter the new year, what are the expectations of Canadian manufacturers? What do they anticipate as the top risks? What will manufacturers need to expand their markets?

These are just a few of the questions asked in the 2019 Bibby Financial Services Canadian Business Monitor Report that surveyed 151 Canadian small businesses  about their results in 2019 and their outlook for the next year. Fifty-two per cent of the manufacturers surveyed export and/or import goods as part of their business and  of those, 54% derive more than a third of their revenue from exports.

The Canadian economy is growing. Growth in employment has slowed since 2018, close to 1.6% compared to 2% last year. Despite this, employment rates are strong, regardless of a bad month in November. Increasing business inventories also indicate possible economic challenges beyond the workers’ dispute which has caused exports of wheat and aluminum via rail systems to largely come to a halt.

Some of the 2019 economic growth was due to temporarily increased government spending, suggesting an economic downturn may be on the horizon if that spending is reduced. That concern is further worsened as payment terms seem to be a growing issue for the manufacturers surveyed. When asked what was most problematic with managing cash flow, the most common answer was ‘getting paid on time’ at 44%.

A challenge for manufacturers is access to funds and managing foreign exchange rate fluctuations: 56% of respondents indicated rising costs are one of the greatest challenges, while 41% identified currency fluctuations. Thirty per cent had challenges with managing cash flow.

Thirty-six per cent of exporters said access to finance would allow their businesses to expand into new markets. Forty-six per cent reported that access to finance would be key to expanding their overseas trade.

The Canadian economy expanded 1.7% in 2019 and analysts expect similar growth over the next two years. According to 2019 reports by the Canadian Chamber of Commerce, 98% of the businesses in Canada are classified as small businesses. These companies account for 70% of the workforce (90% of private sector employment) and 97% of exports, contributing a full 33% of GDP.

Twelve per cent of Canadian small business employment is comprised of small and mid-sized manufacturers with 1.4 million employees in December, 2019.

Kash Ahmad is managing director of Bibby Financial Services Canada, a provider of funding for small and mid-sized businesses based in Mississauga, Ont. E-mail kahmad@bibbycanada.ca.