SMEs concerned with economic future, look to faster payments to improve efficiencies

Payments Canada’s latest survey, the Payments Behaviour Tracker — Business study, examines small and medium-sized enterprises’ (SMEs) business sentiment, payment challenges and perspectives on real-time payments.

Key study findings

• 31 per cent of SMEs believe that they will be better off financially over the next 12 months, while 18 per cent of SMEs in Canada believe the economy will be in better shape 12 months from now.
• A number of business challenges for SMEs have improved since the start of the COVID-19 pandemic.
• Close to three in 10 SMEs experienced some delays in incoming and outgoing payments over the past six months
• Large SMEs would be more likely than small SMEs to send and receive payments in real time if the option was available.

Business sentiment

Financial and economic outlook

The survey results revealed that SMEs had less optimistic views on their future business and economic outlook than commercial businesses. Small SMEs, in particular, are less optimistic, with 41 per cent responding that they believe the Canadian economy will be in worse shape in the future. Only 18 per cent of total SMEs in Canada believe that the Canadian economy will be in better shape twelve months from now. This is a significant decrease compared to a year ago, when 30 per cent felt this way.

Future business plans

SMEs are planning on improving efficiency, decreasing expenses and debt while finding ways to save money within their operations. Over half (51 per cent) of large SMEs answered that their business is planning to improve efficiency in the next 12 months. However, it is unlikely that this will include laying off employees. Only nine per cent of large SMEs plan to reduce the number of employees. Twenty-eight per cent plan on increasing the number of employees. 

Business challenges and opportunities since the COVID-19 pandemic

Over the past three years, the impact of the pandemic on small SMEs has decreased. The greatest improvements for small SMEs have been their sales, profits and management of cash flow. Since July 2020, they had a 29 per cent increase in their net improvement score of sales.

The greatest improvements for large SMEs were similar to small SMEs, with sales being the greatest improvement. This was the only business challenge with a net positive improvement score (11 per cent). 

Payment challenges and opportunities

Payment pain points

For close to three in 10 SMEs (29 per cent), the biggest payment pain point SMEs experienced was delays in incoming and outgoing payments. The next biggest pain points they experienced were cash flow management issues and being forced to accept a specific method of payment due to being the preferred payment method for customers.

When making payments, the biggest challenges SMEs faced were additional fees (31 per cent), processing delays (21 per cent) and managing the business’ cash flow (21 per cent).

One in four small SMEs (25 per cent) reported no challenges/frustrations when making a payment, compared to 21 per cent of large SMEs and 14 per cent of commercial businesses. This is likely due to the lower volume of payments that small SMEs process compared to larger SMEs and commercial businesses.

For both small and large SMEs, there was a considerable increase in security concerns reported as one of their payment challenges. Seventeen per cent of small SMEs reported it as their biggest payment challenge, an increase of 112 per cent from the previous year. Large SMEs had an increase of 40 per cent, with 21 per cent of them reporting security concerns as their biggest payment challenge.

Satisfaction with payment experiences

Both small and large SMEs reported higher satisfaction with on-time payment delivery to clients and suppliers using different payment methods (51 and 57 per cent, respectively) than with other payment experiences. The lowest satisfaction rating among SMEs was fees/charges associated with the payment transaction, with 26 per cent for small SMEs and 29 per cent for large SMEs.

About two in five small SMEs (38 per cent) are satisfied with their ability to manage cash flow using preferred payment methods (compared to 53 per cent last year). On the other hand, 52 per cent of large SMEs are satisfied with their ability to manage cash flow using preferred payment methods. 

Perspectives on real-time payments

Using real-time payments

When it comes to sending and receiving real-time payments, 67 per cent of small SMEs would send a payment and 63 per cent would receive a payment if the option was available. Their top use case for sending payments in real-time would be for government taxes (28 per cent) and for receiving payments it would be for customer bill payments (23 per cent).

For large SMEs, 84 per cent reported they would use real-time payments to send a payment and 78 per cent would use it to receive a payment. Their top use case for sending real-time payments would be to pay a vendor invoice (31 per cent) and for receiving a payment it would be for customer bill payment (29 per cent).

Payment feature with most benefit

At 39 per cent for small SMEs and 36 per cent for large SMEs, Confirmation of Payee is the feature SMEs report they would benefit from the most for sending real-time payments. This feature would give businesses the assurance that their payments are being sent to the correct recipients. The other features that would benefit SMEs the most for sending payments are recurring payments (35 per cent), request for payment (34 per cent) and higher transaction limits (33 per cent). Request for payment (RFP) is a messaging system paired with an instant payment that businesses can use to send bills and invoices directly to customers. Customers can then use the RFP to make a payment and share any relevant corresponding remittance information with the business.

When it comes to receiving payments, request for payment topped the list of features that SMEs would find the most benefit in (38 per cent of small SMEs and 31 per cent of large SMEs). The other features that would benefit SMEs the most for receiving payments are confirmation of payee (32 per cent), recurring payments (31 per cent) and higher transaction limits (31 per cent). Significantly more large SMEs reported that recurring payments would drive the most benefit for them (36 per cent).

About the study

The Payments Behaviour Tracker Business survey was compiled to examine Canadian businesses’ sentiment around their future business and economic outlook. In total, 500 Canadian businesses were surveyed using Leger’s online panel between July 24 and August 4, 2023.