Home Month and Year February 2022 Financial Planning for Tomorrow

Financial Planning for Tomorrow

Small business moves forward


It’s the new year and, while many Edmonton businesses are saying “good riddance” to 2021, they are also adjusting to a technology-driven new business normal. Edmonton-based retail small businesses, restaurants and service-based businesses are re-jigging their financial planning, focusing on recovery, and increasingly hooking into technology.

“No doubt about it, the past 20 months have been very difficult for many businesses across the country,” says the upbeat Pierre Cléroux, Chief Economist at BDC. “Despite all the restrictions to limit the spread of the virus, entrepreneurs rolled up their sleeves, showed a great deal of resilience, adapted to the new reality, and in some cases, changed their business model altogether. I was quite impressed to see how quickly entrepreneurs adjusted and how innovative they have been in dealing with increased prices. In addition, Albertans had a double hit: they had to deal with both the pandemic and the drop in oil prices.”

Business is moving forward but, according to the Canadian Federation of Independent Business (CFIB), financial planning for the recovery may be a bumpy ride. “Right now, Alberta small businesses still have a tough uphill battle to economic recovery,” cautions Annie Dormuth, CFIB director of Provincial Affairs for BC and Alberta. “Alberta small businesses estimate it will take 21 months to full recover from the pandemic.

“Long-term business confidence has seen a mixed bag of reactions and that may be a testament to the high degree of uncertainty in the economy overall. It all impacts a business’ plans to hire and expand. Late last year, around 20 per cent of Alberta small businesses were considering closing, due to the pandemic’s financial impact.”

She highlights CFIB’s Business Closure Report estimate that 34,500 Alberta small businesses were/are at risk of closing. She adds that CFIB is monitoring three indicators of business recovery: fully open, back to normal staff levels and sales. “As of now, Alberta small businesses have a long way to go to reach normal sales levels. While 77 per cent are fully open, only one third indicate they are at normal sales, and 43 per cent are at normal staffing levels.”

The good news is on a human, employer and employee level. The CFIB report shows that 45 per cent of Alberta businesses no longer experience high stress and anxiety levels due to the pandemic.

Staffing and salaries are key factors in business financial planning. “Organizations struggle to attract and retain workers,” warns Helen Vesce, Division Vice President of Service Delivery with ADP Canada, which conducted a survey showing that “some 46 per cent of small businesses owners and operators say hiring in the current environment is difficult, even with increased wages and with more than 27 per cent increasing benefits like additional vacation time. Some 20 per cent are introducing shorter work weeks.

“The survey findings highlight the strength of small business. After weathering an unprecedented storm, they are making a comeback. As recovery continues, businesses who are able to adapt to the changing demands of the new labour market are poised to come out ahead in the search for top talent.”

While all aspects of business were impacted, the uncertainty of financial planning and the unpredictability caused by the pandemic was exceptionally challenging for small businesses.

Jon Horsman, Senior Executive Vice president of Business, ATB Financial and CEO of ATB Capital Markets underscores that, for 20 speedbumpy months, businesses adjusted their financial planning and did what needed to be done, often just to hold on. “They found effective ways to survive the unpredictable environment of lockdowns and re-openings. They adjusted the financial planning and evolved their business models to accommodate the ever-changing economy.” He also cites the astronomical rate at which businesses established their e-commerce and digital delivery. “They switched their focus and adapted.”

There is encouraging, business consensus that recovery has begun, but financial planning needs to be in synch. “There was constant change and unpredictability in lockdowns and outreach to staff and suppliers,” he points out.

Cléroux adds that various organizational and workplace changes are impacting a business’ financial planning and management. “The volume of e-commerce, for instance, is now almost three times pre-pandemic levels. There is no doubt that consumers have shifted to online, and this is not going to go away. For many entrepreneurs, the pandemic disruptions exposed critical weaknesses in the foundation of many businesses of all sizes and of all sectors. Entrepreneurs must embrace technology!”

The role of technology, in the financial planning of small and mid-size Edmonton retail, restaurants, trades and Edmonton’s professional services and other small businesses, is vital.

At the pandemic’s peak in March 2020, particularly for many local restaurants, retail and services were managed by a galaxy of available POS systems. “Many small businesses found their cash flows completely halted while their costs increased,” says Matt Crawford, Director of Emerging and Value-Added Services with Moneris, Canada’s largest provider of innovative, unified solutions for mobile, online and instore payments, hooked into over 11,000 small business locations in the Edmonton area.

“But inventory delays or losses plus additional overhead spending on things like cleaning, plexiglass screens and protective equipment, rearranging bricks-and-mortar locations, and launching an ecommerce presence led to increases in both fixed and variable costs for many businesses. While many business practices have returned to the same state as pre-pandemic,” he says, “managing cash flow to accommodate these new additional costs and changes in consumer behaviour pose a unique challenge.”

BDC’s Cléroux emphasizes that, in many ways, today and in the long-term, businesses being e-commerce savvy is not only important, it is essential. “Those who had invested in technology, like POS systems that are not only payment systems but more and more like business operational hubs and other digital capabilities, were way better positioned and much quicker to adapt to the new business environment. The same is true for businesses that had invested in their online presence before the pandemic. They could benefit from the growing popularity of e-commerce in the wake of the crisis.”

ATB’s Horsman explains that, throughout the 20-month business broadside, “Businesses had to keep pivoting their operations and responses; the financial planning, closing and reopening their doors, building back customers, letting staff go and rehiring and moving to more digital offerings.”

Encouragingly, when it comes to business financial planning and post-pandemic operations, there are small business silver linings in the dark and distant COVID disruption clouds.

“In 2021, we were encouraged to see new business formation. The number of Alberta incorporations rose,” Horsman says. “We are seeing people starting businesses during the pandemic, pursuing innovative and creative entrepreneurial avenues. We saw a shift to sales and services business adapting to an economy where more customers were looking for an online experience and there was definitely an upsurge in remote working.”

“If 2021 was the year of the recovery, I believe 2022 will be the year of going back to a new normal,” Cléroux notes with cautious optimism. “Difficulties will remain, of course, especially with disruptions in supply chains. On the other hand, oil prices will remain high, with a strong and increasing demand, which will definitely help the Alberta economy. I’m confident the Alberta economy will be resilient.”

SOURCEJohn Hardy
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