Despite Greater Revenues, Majority Expect Cash Flow Issues
Conditions are ripe for investments at mid-sized companies over the next six months, according to the inaugural American Express Multinational Survey of Mid-sized Companies. Revenues are reported to be up year-over-year (66%) and a large majority (88%) of mid-sized Canadian companies are confident they can access the capital they need to grow. More than eight in ten firms (81%) plan to make an investment in human capital and hire staff over the next six months. While this is a global trend, Canada is the most likely of the seven countries surveyed to report plans to hire.
However, even with increasing revenues and perceived access to capital, more than 84 per cent of mid-sized companies surveyed expect cash flow concerns to arise over the next six months. However, even those with a centralized "very satisfactory" accounting/expense management system in place say they expect issues with their ability to collect on accounts receivable.
"Revenues are up overall for Canadian mid-sized companies and as a result, the majority of them are looking to hire," said Paul Parisi, Vice President & General Manager, Global Corporate Payments, American Express Canada. "Despite their biggest concern cited as cash flow, mid-sized companies are extremely positive with most expecting to see growth over the next year."
Hiring to Handle Business Volume
Hiring appears to be on the upswing at mid-sized companies. More than half of companies surveyed (59%) say they currently have more employees than they did one year ago. Among those currently planning to add staff, nearly half (47%) say they need to hire to support business volume. Additional reasons for hiring include:
Seasonal help needed (36%)
New business ventures (32%)
The company finally found the right candidate/ positions that they had been trying to fill for some time (26%)
The company needed more people to delegate to (25%)
Among those who plan to add staff over the next six months:
47% plan to hire only full-time employees
27% plan to hire only part-time employees
12% plan to hire both full and part-time employees
The survey results point to additional optimism for those considering employment at mid-sized firms. Almost one third (31%) of companies surveyed say the main reason they are able to retain employees is their compensation package (including competitive salary and stock options).
Growth is Top Priority
Financial decision makers surveyed have a positive outlook on business prospects over the next six months, irrespective of how the economy behaves. Fifty-seven percent say they expect their business to grow regardless of the economy and more than a third (34%) have an even more positive outlook, saying they actually see the economy improving and expanding opportunities for their business.
The single most important priority for nearly half of Canadian business owners (47%) over the next six months is growing their business. As they look to expand, companies believe acquiring new customers (19%) will most help them grow. In addition mid-sized companies are prioritizing retaining/growing existing customer relationships (19%) and increasing investments in infrastructure (19%), followed by attracting and retaining top talent (17%) and accessing more cash flow/capital (16%).
As they tackle growth, mid-sized companies face a variety of challenges. The most prominent challenge of those companies surveyed is managing expenses/the rising costs of doing business (26%) followed by:
The uncertain economy (20%)
Acquiring new customers (14%)
Retaining/growing existing customer relationships (13%)
Attracting and retaining top talent and accessing cash flow/capital (each 10%)
Regulatory and compliance requirements (8%)
Despite these challenges, mid-sized businesses in Canada are looking forward and focusing on growth and expansion in the coming years.
Revenues on the Rise, Yet Cash Flow Tracking a Concern
Across all the companies surveyed, 66 per cent said their revenues are more than they were a year ago, with a quarter (25%) saying revenues are the same as a year ago and just 8 per cent reporting they are less when compared year-over-year.
When surveyed further on financial management processes, the data revealed that over half of the companies surveyed (57%) have a centralized expense/accounting management system in place. Nearly all (99%) are "satisfied" with the process, and 58 per cent report they are "very satisfied". Yet surprisingly, the greatest cash flow concern is the ability to collect on accounts receivable (27%). Additional cash flow issues include:
The ability to accurately track cash flow, both in and out of the business (22%)
Having enough cash on hand to win new business (19%)
The ability to meet payroll (11%)
The ability to pay bills on time (6%)
On average, of those companies surveyed in Canada, most have been in business for twenty-nine years and employ 2,510 people. Nearly three-quarters (72%) are privately-owned with over a quarter being either founder or majority-owned (26%) or partner-owned (26%). Of the Canadian companies surveyed the mean revenue reported is $161.4 million Can in the last fiscal year.
Tapping International Markets Proves Fruitful
As mid-sized Canadian companies search for new ways to do business they are looking beyond Canada and operating in international markets. Two-thirds (66%) of companies have tapped international markets as a way to acquire new customers. More than half (52%) are reaching out to find new suppliers for products/services and slightly fewer (42%) are manufacturing products internationally.
As an additional tactic to acquire new customers and retain current clients over the next six months, almost one third (31%) plan to increase investments in their sales and marketing functions.
"Overall, mid-sized Canadian companies should feel pleased with the confidence we are seeing in their predicted business growth and in the Canadian economy," said Parisi. "The economic uncertainty of the past few years has now tapered, and despite some ongoing concerns with cashflow, we can look forward to a strong and confident year ahead for these businesses."
