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More than three-quarters (76%) of Canada's small business owners call effective cash-flow management critical to business success

MARKHAM, ON, April 10, 2012 /CNW/ - While Canada's economy is steadying, cash flow remains tight for the country's small business owners, and, in turn, the vast majority are taking a more active role in managing this essential aspect of their business.

The quarterly American Express Small Business Monitor reveals that three-quarters of SBOs (76%) believe effective cash-flow management is critical to the success of their business, with most small businesses (72%) reporting that they manage cash flow well.

This is an interesting claim, considering that the survey also reveals that 50 per cent of small businesses experienced cash-flow problems last year. As such, 82 per cent of owners now report that they've taken specific steps to gain a greater understanding of their cash flow. A full half (50%) say their management teams evaluate cash flow at least bi-weekly, with 11 per cent evaluating it daily. Another 35 per cent monitor cash flow monthly.

"Business owners understand the value of proper cash-flow management and are keen to play a more direct role in this area," says Athena Varmazis, Vice President and General Manager, Small Business Services, American Express Canada. "We're seeing that they realize success means having the foresight to strategically monitor patterns and implement tactics accordingly."

SBOs struggle to collect timely payments

Many SBOs have identified key cash flow areas of difficulty: long-term planning (10%), market changes (9%) and bookkeeping (6%) are among their challenges.  But the most difficult part of managing cash flow is accounts receivable, with 49 per cent reporting a struggle in this area. The average number of days it took to collect on outstanding accounts receivable in 2011 was 40.2 - a slight improvement over the 40.7-day average reported in 2010.

"Accounts receivable was overwhelmingly recognized as the leading issue small business owners are facing today in regards to cash flow, with nearly half of those surveyed citing difficulty in this area," says Varmazis. "And while the average time it takes to collect is improving slowly, year-over-year, it remains a significant pain point for SBOs who struggle to manage their monthly expenses."

SBOs rely on range of techniques to improve cash-flow crunch

While more than half (51%) of SBOs report difficulty accessing debt-financing, like a line of credit, an equal number (53%) haven't had to use external sources to cover cash-flow issues. Instead, SBOs are relying on their own means, with most business owners (20%) saying they are willing to use their personal money or lines of credit to resolve the cash-flow crunch.

With regard to improving accounts receivable, SBOs indicated willingness to increase their business line of credit (15%), collect on overdue receivables (13%), or negotiate with clients, suppliers or creditors (10%). The majority of SBOs (84%) say they don't use collection agencies.

"Small business owners are clearly willing to turn to their own personal credit or finance if it means sustaining a healthy cash flow in their business," says Varmazis. "This speaks volumes about the importance they put on their business relationships."

To improve their cash flow process, Canadian SBOs are implementing a number of techniques, including: accepting electronic payments (49%); requiring deposits or staged payments (38%); using a line of credit or a debt vehicle (33%); delaying payment of some accounts payable (30%); and improving inventory management (29%).

SBOs increasingly confident that business will continue to grow

In terms of the quarterly index portion of the survey, the Monitor reveals that Canada's small businesses remain increasingly hopeful about future revenue growth, profitability and their overall financial state; more than half (54%) of SBOs report that their business's current financial position is improving - up 22 points since January 2011. And the vast majority (87%) remain confident that their business will grow over the next six months.

Further, SBOs are showing a stronger willingness to invest to grow their business. One in three businesses (34%) say they are willing to take above average or significant risks in business over the next six months, with investment in new equipment or capital expenditures leading the charge. In fact, 61 per cent of SBOs express a willingness to so invest in new equipment or capital expenditures - up six points since last quarter and a full 11 per cent since last year.

"The confidence business owners currently feel has increased significantly in the past year," says Varmazis. "Now, more than ever, business owners are looking to the future."

About the American Express Small Business Monitor
From February 3-22, 2012, Rogers Connect Market Research conducted an online survey on behalf of American Express Small Business Services with a sample of 500 Canadian small business owners each employing between 2 and 100 people. The margin of error for the total sample is +/- 4.3%, 19 times out of 20. In order to ensure the results are representative of the entire population of small business owners in Canada, the data have been statistically weighted for small business by region according to Statistics Canada. Respondents were located across Canada and came from a variety of industries, including health, social services, education, tech, sales and skilled trades. Due to rounding, some results may add to over 100 per cent.

About American Express Small Business Services
American Express Small Business Services (SBS) is dedicated exclusively to the success of small business owners and their companies. SBS supports business owners with exceptional service. We offer tailored products and services that deliver purchasing power, flexibility, control and rewards to help customers run their business. Specifically, business owners can leverage an enhanced set of products, tools, services and savings, including charge and credit cards, robust online account management capabilities and savings on business services from an expanded line-up of partners. To obtain more information about SBS, visit www.amexforbusiness.ca or www.facebook.com/AmexforBusiness.