With the recent recession, businesses have felt the credit crunch, and the pressure of staying afloat amidst all the financial problems. Studies have recently shown that the small and medium businesses of Alberta have been the most pessimistic concerning future performance, while Newfound Land is the most optimistic. These results were posted in the Canadian Federation of Independent Business barometer. Although the overall optimism percentage has gone up, it is still far below the historical average. This lack of optimism is backed up by the fact that only 20% of businesses are financially doing better than they did a year ago.
http://www.financialpost.com/most-popular/story.html?id=1427430
With much less cash flow around the world due to the market failures in the US, small businesses should most definitely on the look out for how much to supply of a product, in comparison to the demand for it. This means the operating activities of a business' cash flow should be much more monitered, because chances are, demand will be lower, which should be counteracted through minimizing the amount of purchased inventory and expenses used. For most businesses in Canada, the indirect approach of recording the cashflow in the cashflow statement, rather than the direct approach.
Although Canada is not in as bad of a financial situation as the US is in due to the conservative and high regulatory banking system, there should still be no room for unneccesary spending from small businesses. At this point in time, it would not be the best of interests for anyone to start a business. With over 80% of businesses doing worse than they did a year ago, consumer demand is much too low to make a good profit through this recessionary period. For those who already own a business, not all is bad; with the interest rates for bank loans and credit card fees being lowered, spending is not a costly as it was months ago.
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Reading the results of that study, makes me really wonder why Alberta is the most pessimistic while Newfoundland is the most optimistic when it comes to the future performance of their small and medium businesses. It's interesting how there are studies being done on the level of optimism in Canada.
When talking about the current financial situation, I strongly agree that there shouldn't be any unnecessary spending from small businesses. Cash is a very important asset for each and every company. Although it can easily flow in and out, there needs to be a lot of caution when spending and investing. This goes for both large and small businesses. Like you mentioned, companies should monitor their cash flow more to ensure better financial management. These careful measures may take more work and time out of the company, however, it will definitely pay off in the future.
M.Wong (Block B)
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