Mastering Financial Forecasting: 3 Things You Need to Know

Financial forecasting is a vital skill that many small business owners overlook, especially when first starting a business. Impacting sales projections, planning for expenses, and cash flow, this skill makes it easier for you to see how your business will do not only today, but tomorrow, next week, and next month. Financial forecasts make it possible for you to determine whether you’ll have sufficient funding to keep your business operating in the future, or if additional funding may be needed.

Mastering Financial Forecasting: Predicting and Planning for Small Business Success

The Importance of Financial Forecasting in Strategic Planning

A financial forecast will project sales, expenses, and cash flow into the future of your business, allowing you to determine areas where financing may be required to prevent your business from shutting down or suffering other financial difficulties. But beyond seeing into the short-term future, financial forecasting also plays other roles in your business, specifically in your strategic planning process.

Having a strategic plan for your business gives your budget some place intentional to put every dollar and gives you strong direction on which way to go as you face a range of issues in your company. Though you’ll still want to have a buffer set aside for unexpected emergencies, having a strategic plan that includes expected growth, capital equipment replacement, annual expenses, and similar revenue and expenses in place makes it easier to make decisions that are in line with your overall strategic plan.

Think of it this way: if a business didn’t plan for capital equipment replacement or for a slow season, the business might be caught without enough funding to successfully complete the financial cycle. With a plan in place, the owner, management, and leadership of the business can make decisions that are in line with the plan, preventing wasted time, money, effort, and materials.

How to Create Financial Forecasting Models and Projections

Though expenses, revenue, and cash flow all look at different aspects of your business’s overall health, all three follow the same basic rules when undertaking your financial forecasting. The biggest difference is which factors you’ll be considering.

Define your financial forecasting purpose. What do you want to learn? Are you estimating sales or determining if your budget will work? These purposes will help you decide which measurements to use in the process. 
Pull your past financial data and statements. The past got you to where you are today and will help you determine where you’ll go in the future. You’ll want to know about revenue, liabilities, equity, expenses, losses, investments, income, per-share earnings, and fixed costs.
Choose a timeframe. How long do you want to go into the future? For a business that has a regular income, you can create financial forecasting based on a few weeks’ data, but for irregular or seasonal income, go for several years. Most companies use a single fiscal year. If you’re doing long-term planning, pull long-term data and trends.
Decide what financial forecasting method to use. Quantitative forecasting uses existing historical data for identifying trends and patterns but may not take into account industry changes. For those changes, a qualitative forecasting method that includes expert opinions and sentiment about the business and industry is more accurate.
Document the process and review calculations. Much like weather forecasts, financial forecasting isn’t 100% accurate and will change more the further you get from the point of analysis. Document your process for future use and revision and check its accuracy after strong internal or external changes. Automation can make this process easier.
Analyze the data. By regularly checking the data created regularly in your business against your forecast, you can determine how accurate your financial forecasting will be. You can also determine when your goals and plans should be accordingly adjusted. 
Repeat. Based on your timeframe in #3, repeat your financial forecasting on a regular basis to ensure that you’re still on top of the figures and in control of your spending and income.

By understanding how these documents are created, you’ll have a much better idea of how to leverage them to your company’s advantage in the future, including when you’re preparing an annual budget, finding problem areas, setting intelligent business goals, attracting investors, and reducing your risk. You’ll also be able to undertake innovative discussions about your company’s financial health with financial institutions, creditors, and other organizations you work with.

Why You Should Regularly Review and Adjust Financial Forecasting

However, it’s not enough to simply finish these financial forecasting models. You’ll also want to take time on a regular basis to review and adjust as needed to optimize your results. As an example, if you have higher or lower sales or expenses than was forecast, you have the option of slowing down the progress of your strategic plan or speeding it up. The strategic plan will still come into play, but it will have its timeline adjusted when financial forecasting is reviewed and adjusted.

Though financial forecasting can seem like a very complex process, it’s actually fairly straightforward once you understand the basic processes that are involved. Why not take a little time when things are quiet and work one out using the steps above? Once you’ve figured out how to accomplish this task, your business will be in much better hands and will be facing a much stronger future.

Would you like a free review of your financial statements? You can book one here.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Unlocking Business Insights: Using Key Financial Ratios to Analyze Small Business Performance

In the competitive business world, small business owners need to make informed decisions to ensure the success and growth of their ventures. One crucial tool at their disposal are financial ratios, which provide valuable insights into a company’s performance.

By understanding and leveraging financial ratios, you can assess your business’ financial health, identify areas for improvement, and make strategic decisions to drive their businesses forward. This article will explore the power of key financial ratios and how you can use them effectively.

The Significance of Key Financial Ratios

Financial ratios are quantitative tools that help assess a company’s financial performance, efficiency, profitability, and liquidity. They provide a snapshot of the business’s financial health and offer benchmarks for comparison with industry standards and past performance. You can utilize these key financial ratios to understand your company’s financial position and make data-driven decisions.

Liquidity Ratios: Liquidity ratios help you understand your cash flow by assessing your ability to meet short-term financial obligations. You can calculate ratios such as the current ratio and quick ratio to determine if the company has enough liquid assets to cover immediate expenses. These ratios help identify potential cash flow issues and enable proactive measures to ensure smooth operations.
Profitability Ratios: Profitability ratios measure a company’s ability to generate profits and help in assessing business performance. Ratios such as gross profit margin, net profit margin, and return on assets (ROA) enable you to gauge your profitability and compare it to industry standards. By analyzing these ratios, business owners can identify areas for cost reduction, pricing adjustments, or revenue enhancement to maximize profits. We explore many of these in The Ultimate Small Business Profitability Checklist.
Efficiency Ratios: Efficiency ratios provide insights into how effectively a business utilizes its resources to generate revenue. You can analyze ratios like inventory turnover, accounts receivable turnover, and asset turnover to assess operational efficiency. These ratios help identify bottlenecks in the supply chain, inventory management issues, or inefficiencies in resource allocation, enabling you to streamline operations and improve overall efficiency.
Debt Ratios: Debt ratios evaluate a company’s leverage and ability to meet long-term financial obligations. You can calculate ratios like debt-to-equity and interest coverage ratios to assess their company’s risk exposure and debt management capabilities. These ratios assist in making informed decisions about borrowing, managing debt, and maintaining a healthy balance between equity and debt.

Interpreting and Applying Financial Ratios

While understanding these key financial ratios is essential, interpreting them correctly is equally crucial.

You should compare their ratios to industry benchmarks, historical data, and competitors to gain meaningful insights. Additionally, tracking ratios over time allows you to identify trends and evaluate the impact of strategic decisions.

It is essential to note that financial ratios should be used with other performance indicators and qualitative analysis to make well-rounded assessments. You can learn more about some of these metrics in The Ultimate Small Business Profitability Checklist. You’ll also find key financial ratios formulas in a key financial ratios pdf.

Financial ratios serve as invaluable tools for small business owners to assess their company’s performance, financial health, and areas for improvement. By leveraging liquidity ratios, profitability ratios, efficiency ratios, and debt ratios, you can gain a holistic view of their operations and make informed decisions to drive growth and success.

Understanding and interpreting financial ratios empowers you to optimize resource utilization, manage cash flow, improve profitability, and make strategic decisions for your business.

To learn more about how to calculate these ratios using your financial statements, check out How to Read Financial Statements: A Guide for Business Owners.

If you’d like help better understanding your financial ratios why not book a free consultation with one of the experts at Avisar.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Other Measures

Small Business Credit Card Fees

Budget 2023 announced that commitments had been obtained from Visa and Mastercard to lower fees for small businesses. More than 90% of credit card-accepting businesses are expected to see their fees reduced by up to 27%.

Automatic Tax Filing for Low-income Canadians

Budget 2023 announced that the number of Canadians eligible for CRA’s automatic File My Return service will be increased to 2 million by 2025, almost tripling the number of currently eligible Canadians. In 2022, 53,000 returns were filed using this service. In addition, a new pilot project will be implemented to assist vulnerable Canadians in applying for benefits even if they do not file tax returns.

Student Benefits

Budget 2023 proposes increasing Canada student grants by 40%, raising the interest-free Canada student loan limit from $210 to $300 per study week, and waiving the requirement for mature students (aged 22 or older) to undergo credit screening in order to qualify.

Dental Care for Canadians

The Canadian dental care plan would provide coverage for all uninsured Canadians with an annual family income of less than $90,000 (the Canada dental benefit only provided benefits for children under 12) by the end of 2023. The plan will be administered by Health Canada with support from a third-party benefits administrator. Benefits are reduced for families with income between $70,000 and $90,000.

Protecting Federally Regulated Gig Workers

Budget 2023 proposes to amend the Canada Labour Code to strengthen prohibitions against employee misclassification for federally regulated gig workers such that they will receive protections and benefits including EI and CPP.

Ensuring the Integrity of Emergency COVID-19 Benefits

Budget 2023 proposes to provide $53.8 million in 2022-23 to Employment and Social Development Canada to support integrity activities relating to overpayments of COVID-19 emergency income supports.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Previously Announced Measures

Budget 2023 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release.

Legislative proposals released on November 3, 2022 with respect to Excessive Interest and Financing Expenses Limitations and Reporting Rules for Digital Platform Operators.
Tax measures announced in the Fall Economic Statement on November 3, 2022, for which legislative proposals have not yet been released, including: automatic advance for the Canada workers benefit; investment tax credit for clean technologies; and extension of the residential property flipping rule to assignment sales.
Legislative proposals released on August 9, 2022, including with respect to the following measures:
borrowing by defined benefit pension plans;
reporting requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs);
fixing contribution errors in defined contribution pension plans;
the investment tax credit for Carbon Capture, Utilization and Storage;
hedging and short selling by Canadian financial institutions;
substantive Canadian-controlled private corporations;
mandatory disclosure rules;
the electronic filing and certification of tax and information returns;
Canadian forces members and veterans amounts;
other technical amendments to the Income Tax Act and Income Tax Regulations proposed in the August 9th release; and
remaining legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax, excise levies and other taxes and charges announced in the August 9th release.
Legislative proposals released on April 29, 2022 with respect to hybrid mismatch arrangements.
Legislative proposals released on February 4, 2022 with respect to the Goods and Services Tax/Harmonized Sales Tax treatment of cryptoasset mining.
Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
The transfer pricing consultation announced in Budget 2021.
The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Time to Eat the Frog

In the spirit of the New Year, we thought we’d talk about something many of us have made resolutions to get rid of over the years: procrastination. Nobody wants to do it. We all know it’s a bad habit that kills productivity and limits potential and it’s something that most of us have struggled with at some point in our lives. But what can we do about it?

Well, have you tried eating a frog?

No, that’s not a typo. It’s a strategy to overcome procrastination. The phrase “eat the frog,” popularized by productivity expert Brian Tracy, refers to the idea of tackling your most difficult or least enjoyable tasks first thing in the morning. The idea is that by getting the “frog” out of the way, you’ll be able to move on to other tasks with a sense of accomplishment and momentum.

But why a frog?

The metaphor is meant to convey the idea that this task is something that you really don’t want to do, much like how most people would rather not eat a frog (hands up if you’re in that group). And once it’s out of the way, the rest of your day can be smooth sailing.

So how do you actually go about “eating the frog”? Here are a few tips to get you started:

Identify your frog: Take a few minutes to think about the tasks on your to-do list and determine which one is the most difficult or least enjoyable. This is your frog.
Set aside time for the frog: Make sure you have a dedicated block of time to work on your frog. It’s important to avoid distractions during this time and focus solely on the task at hand.
Break the task down: If your frog is a particularly large or daunting task, it can be helpful to break it down into smaller, more manageable chunks. This can make it feel less overwhelming and help you make progress more quickly.
Get started: Once you have your frog identified and your time set aside, it’s time to get started. It’s natural to feel some resistance or hesitation but try to push through it. Remember, the sooner you get the task done, the sooner you can move on to other things.

Eating the frog might not be the most pleasant experience, but it can be a powerful tool for combating procrastination and increasing your productivity.

By tackling your most difficult tasks first thing in the morning, you’ll be able to start your day off on a positive note and build momentum as you move through the rest of your to-do list. So the next time you find yourself faced with a task that you’re tempted to put off, remember: eat the frog and get it done!

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

The 4 I’s of Missed Expectations

This post comes from guest expert, Mike Sambrook, MA, Principal, Brackish Consulting Group Ltd.

It’s been said that having high expectations of someone is a compliment and I agree.

Unfortunately, the compliment paid often leads to frustration, disappointment, or even anger when others do not live up to our expectations. Leaders often have high expectations of themselves and these expectations drive them to high achievement.

These same expectations though, when directed towards others cause many leaders to question why their people cannot “just do what I would have done”!

I have worked with leaders for over a decade now and helping them manage this gap between expectations and reality may be the most challenging aspect of my work. “Why can’t, or why won’t my employees just do what I expect?”

This is the million-dollar question – why can’t they?

As is typically the case for leaders, the answer to this question is found by looking inward. Here are four common reasons our expectations are missed:

Ignorance

A common reason our expectations go unmet is simply because our employee(s) are ignorant of said expectations. They do not know what we expect because we have not communicated our expectations clearly.

Leadership author Patrick Lencioni, in his fantastic book “The Advantage”, suggests a key attribute of great organizational leadership is to overcommunicate clarity.

If our people do not know what is expected of them, we have no one to be disappointed in but ourselves. Clear communication of expectations is a gift to our people and a significant contribution to ensuring our expectations are met.

Incompetence

The second “I” of missed expectations is incompetence. Simply defined, incompetence means our people do not know how to accomplish the task that has been assigned to them.

This is a training issue. So often I hear leaders complain, “they should be able to do this”. Whenever I hear the word should I immediately point it out and ask leaders to explain why their people should be able to accomplish the assigned task or directive?

Answers typically range from how long they have worked here to how much they are paid, but these variables have nothing to do with whether employees have been adequately trained. Most people do not like to make mistakes; if faced with a task they don’t know how to accomplish well, they will spend time trying to figure it out, stall, or avoid it all together.

A failure to properly train employees is a recipe for missed expectations.

Incapacity

A very common reason leaders’ expectations are missed is because of incapacity.

Incapacity applies not only to our frustrations with others but is often the reason we become frustrated with ourselves. We simply do not have the capacity to successfully accomplish all that we wish we could.

A simple test to ascertain if you or your team has the capacity to accomplish a task is to quickly look at the 3 T’s (time, team, tools). Ask yourself these questions: Do we have the time required to meet our expectations for this task? Have we assembled the right team? Do we have the proper tools (physical, financial, etc)?

Too often, we look at a project in retrospect to see what went wrong and we realize we did not match our budget (time, money, people) with the requirements necessary to succeed. We simply did not have the capacity to take on the job in the first place.

A leader must ask the question, do we have the capacity for this project right now? Does this person have the capacity to accomplish what I expect? Have I provided them with everything they need to succeed? If the answer to any of these questions is no, or I’m not sure, we once again have to look inward to deal with the frustrations of missed expectations.

Intentionality

The final “I” of missed expectations in intentionality. At this point we have answered the questions inherent in the first three I’s: my people know what to do, they know how to do it and they have been properly resourced; they have capacity.

So why can they still not get things done the way I want them done? Perhaps they lack intentionality.

As leaders, we know what is important to us and to the outcomes we require. We are motivated by our desire to succeed; however, we define success. But do our people have that same definition? Are they working with the same motivation we are?

Each of us is wired differently and we are motivated by different inputs and outcomes. What is important to one person is not necessarily naturally important to another and therefore our intentionality towards tasks differs.

What we may find to be extremely important, another may think is a minor detail. As leaders, we are responsible to understand how our people are motivated and how to steward these motivations towards the necessary outcomes of the organization.

If our people do not appear to be working with enough intention or motivation, we must figure out how to communicate expectations in a way that matches what our people are working for. One of my mentors once said, “What people want to do, they do”; leaders must engage people on the level of their “wants”. Why would they want to do this job well?

Leadership is Difficult

This sounds like a lot of work! Wouldn’t it be easier to simply lower my expectations?

You have probably gone down this road many times in your leadership journey and you already know the answer to this question – no, it isn’t easier! Lowering our expectations of others ends in the same frustration and burnout that led us to this conversation in the first place.

Additionally, if having high expectations of someone is a compliment, then having low expectations is an insult. Leadership is hard work but it is worthy work. If we put in the work to ensure our people know what to do, know how to do it, have the capacity to be successful, and are appropriately motivated we will realize the benefits of a successful team and our expectations will be consistently met.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Leading in a Tough Labour Market

Our guest author this week is Cameron Keller, a Professional Certified Coach with the International Coach Federation, and Principal at Kaleidoscope Training and Consulting.

I am typing this as I sit on a plane heading back home to Vancouver from Toronto. Just about 15 minutes ago I overheard a conversation between a woman and her seatmate. The woman was likely not far from retirement age and explained to her seatmate that she can work from anywhere. She went on to explain that she hadn’t planned on still working, but as long as she can work remotely, she’ll keep working because she enjoys it.

We’ve all had those conversations in the last couple of years where we find people reflecting on how different life is, if remote work is an option. This will be relevant further down in this article.

Over and repeatedly these days I have conversations with clients about the challenges in the labour market. Who could have ever predicted that in 2022 we’d have 1.95 jobs available for every unemployed worker in Canada? We knew that this was coming, but most of us didn’t expect this reality for at least another 7 – 10 years. Things have changed rapidly.

This reality has all kinds of implications. My clients face a few significant challenges with this. Beyond the obvious of being able to recruit workers, retention has become an issue. It just seems that people are willing to jump ship, often with little notice – as something seems more attractive elsewhere. Additionally, many company and agency recruiters are finding they are forced to lower the bar when it comes to the quality of individuals. We love to say we are only going to hire A players, but how realistic is that? Many of my client companies are finding they are settling for B players in hopes that they can support them to become A players down the road.

So how do we address this problem? This problem of not enough workers and having to compete with other employers for people’s services. Just last month I was in Maui and I saw a sign advertising a $1,000 signing bonus to work at a small convenience store / gas bar. Is the answer that we simply must find a way to pay higher? Is it all about the paycheque?

Although it is partly true that the “highest offer” may be what gets someone through your employment door, I can promise that pay alone is not what will keep them. I suggest there are three critical things that employers need to consider if they want to recruit and retain good talent. These are: Employee Engagement, Health and Wellness, and Standing for Something.

Engagement

Employees, particularly the younger generation, long to feel like more than just an employee. The world of work is no longer just something we do, it’s something we are. I am not trying to suggest that our work entirely defines who we are, but it is certainly beyond just a job. People have a wired-in need as mammals to belong. As people become more and more isolated in life as a result of social media, the pandemic, and other factors which make connecting with others in meaningful ways more difficult, they want to belong at work.

If you want to keep employees, you need to promote employee engagement. That is done by supporting individuals to contribute in meaningful ways to decisions that impact them, through to the overall direction of the business. Clearly, you must give direction and sometimes you have to be prescriptive. However, if you can find ways to allow workers to have power over some decision-making, even if it’s how they go about prioritizing their tasks in a given day, it makes a huge difference for the worker and how they feel about their value. Employees also really appreciate being informed regarding the overall direction of the company, as well as its strategy and what sets it apart. They also appreciate knowing if the company is being successful or not, and yes, that includes being aware of profitability. A lot of business owners don’t want to share financial metrics with people, as they want to hide the fact that they are so profitable if in fact, they are. This is a mistake.

People on your team want you to be successful, and letting them know where there is success, including in profitability, helps them become more engaged. Business owners fear that if their workers know they are so profitable they will demand more money. That simply does not play out. If individuals are compensated, they are seldom greedy. If you can find ways to reward your workforce for overall profitability, it makes a big difference as well.

Pay attention to Health and Wellness

These days, there are so many pressures on individuals which are contributing to much more complexity in life. People are finding it more and more challenging to manage things like anxiety and mood problems. Moreover, relationships have become so much more complex through the pandemic, etc. Gone are the days when an employer can say, “leave your personal stuff at home and don’t bring it to work.” In fact, the research tells us this is impossible. You as an employer have both an opportunity and a responsibility to offer a level of support to your employees.

I am not saying that all of a person’s personal problems and issues become your problems and issues. However, if and as you do pay attention to overall health and wellness, you will get a great return. Sometimes this takes the form of flexible work arrangements…other times it’s providing support for employees who have challenging parenting or marital situations that create limitations. It can also take the form of being sure that your employee benefits allow people to access the support of paramedical professionals to help with physical and mental health promotion.

Workplaces that provide a high level of social support contribute to the health and wellness of their employees. A culture of support, where the human side of the organization is held with high importance and people feel valued as individuals first and foremost, leads to greater retention and productivity. Leaders have a role to play in creating and maintaining this culture, through how they take time to focus on individuals and show genuine support and care for their overall wellness.

Stand for Something

Sometimes it can be hard to articulate a higher-level purpose to our business beyond the obvious of trying to make money. As hard as it is though, it is always possible. It is possible to create a purpose statement that well describes what your business is doing to contribute positive outcomes beyond just the business. Moreover, it is important that your workplace stand for something. This can be a social justice issue, supporting a not-for-profit, or being a voice in community for something that makes a difference.

The worker of today wants to be part of something that has meaning. The younger worker in particular thinks a lot about social justice issues, the environment, etc. What does your workplace/company stand for? What are you actively doing to create meaningful change in the world, even if it has absolutely no connection to the kind of actual work your business does? I have many client examples where a company is actively doing something of meaning in the community that has nothing to do with the actual business, but employees rally around it.

If you haven’t found a cause or a way to contribute above and beyond where you are actively involved as a company in supporting something, it’s time to get on it!

Call to Action

It may be that you are doing a good or great job in one or more of these three critical areas. However, chances are there is room for continued improvement. Perhaps undertake a staff survey related to these areas to see how your workforce feels about these issues. Through the survey, you can find out what is most important to them, as well as what their perceptions are regarding how your company is actually doing in these areas. Create a plan to move the needle forward in meaningful ways.

Remember the woman on the airplane? Think of how her employer is benefiting by being able to keep her employed through the way they are honoring her wellness through flexibility. It makes a difference!

Cameron Keller www.vancouverexecutivecoaching.ca is a Professionally Certified Coach who works individual with executives and leadership teams. He has walked the walk of the executive world himself and knows what it’s like to carry large scale responsibility for national initiatives. Cameron specializes in creating healthy workplaces and fully aligned executive leadership teams. He is an expert in working with businesses to develop and execute on industry leading strategies.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

5 Top Reasons Small Businesses Fail and How to Avoid Them

Why does the prospect of starting a small business come burdened with high risk? According to Innovation, Science and Economic Development Canada, the smallest businesses in Canada that only start with fewer than five employees have only a 62.5% chance of remaining open after five years and a 28.6% likelihood of survival after 17 years. However, small businesses with under 100 employees make up 97.9% of all businesses in the country. Therefore, even with high risk, many small companies still survive.

Understanding why small businesses fail will help a company to enact programs that prevent the most common reasons for failure and increase chances of succeeding over the year.

1. Not Understanding the Numbers

A big reason why small businesses fail is a lack of funding or working capital. This can often come as a result of not understanding, or not paying attention to what their financial statements are telling them.

Not accurately tracking your revenue and expenses will leave you flying blind. Are you really profitable? Do you know? In some instances revenue may be great and the balance sheet might look strong, but you may not actually have the cash to keep your business running.

As a business owner, you need to know how much of your revenue is needed for wages, utility bills, or rent so you can set growth and cost-savings goals accordingly.

Taking the time to read and understand your financial statements can prevent you from being surprised and allow you to react and plan in a way that moves your business forward.

Resource: How to Read Financial Statements for Business Owners

2. Not Knowing About Funding Options or Starting with Adequate Capital

Many small business owners don’t understand how difficult getting loans from banks can be. Without adequate funding, some business owners may attempt to dip into personal savings or friends to finance their ventures. Banks recognize the risk of small business failures. Consequently, they are historically less likely to provide loans.

To help business owners get operating funds, the Canadian government took action and passed amendments to both the Canada Small Business Financing Act and the Canada Small Business Financing Regulations to make getting loans easier for small business owners and less risky for financial institutions. The lenders share some of the risks with the business owners and have new products available for the small businesses to use.

Under this program, small businesses can use lines of credit for daily operating expenses or term loans for major business purchases. Each type of funding allows the lender to apply additional interest on top of its prime lending rates or mortgage rates, depending on the product. While businesses pay slightly more in interest, they have a greater chance of getting the funding they need to establish and grow their businesses.

The good news in Canada comes from the 2021 small business Credit Conditions Survey. The majority of small businesses that sought financing had full or partial approval. For instance, 89% of small businesses earned approval for either short or long-term loans. Among the 42% of businesses that requested government financing, 95% got at least some of the funds they asked for. While 85% of businesses reported not requesting financing because they didn’t need it, 3% of businesses did not know where to get funding and 4% didn’t apply because they thought their request would fail. Businesses that don’t seek funding will never get the money they need.

It can help your cause to know what financial ratios and metrics your bank or lender will be most interested in. Speak to your accountant first and make sure those numbers are in good shape and identify other information that may help your application.

3. Not Meeting Market Needs

The type of business can make a difference in whether it will last. In Canada, small and medium businesses that sell goods had higher survival rates from three to 17 years than those that provided services. However, even for companies that provide goods, the chances of survival depend on meeting the market’s needs for products. If goods sold have no buyers or fail to have profitable pricing, the business still risks failure.

Several famous products failed because they lacked market demand. The Microsoft Zune portable music player could not distinguish itself nor compete with the well-established iPod. The augmented reality tool Google Glass looked unattractive while wearing it, cost far too much for most people to afford, and had poor marketing to promote it. Finally, the Segway could not find an audience of users when alternatives, such as biking or walking, already existed.

Even initial success can be a hindrance sometimes because it can blind business owners to the need to pivot. Business owners and entrepreneurs can become so invested in their product or service, they miss the signs pointing to the need to change or a new opportunity. That dip in sales might not mean it’s time to spend more in advertising, it could mean it’s time for a bigger shift to a new market, product offering, or sales channel.

4. Failing to Create a Business Plan

Failing to plan for the establishment and growth of a business will lead to its failure. Business plans must have clear goals and outlines for how to manage operations. These plans must include information on managing the company, risk management planning, financing needs and sources, marketing plans, and examination of competition.

Clearly outlining the management of the company during its startup phase and as it grows will ensure an efficient organization of employees and managers that meets the needs of the operation. The business owner must have the ability to delegate tasks to management staff, which allows for easier transitions later if the owner chooses to expand the company or retire. Part of the management plan should include information on an exit plan for the owner. The business owner should not assume that they will run the company forever. Having a plan to pass on operations to a new manager or business owner will facilitate future changes in leadership.

Risks for companies will change over time, but all businesses need to evaluate their sources of potential risk and identify ways to mitigate them. Risk management includes creating disaster plans to respond to emergencies, natural disasters, or security breaches. Cyber security should be an important part of the business plan. According to the CIRA Cybersecurity Survey in 2021, 36% of businesses of all sizes reported more cyber-attacks during the pandemic. Data security is vital to all businesses, but especially for small companies that could face devastating losses. The survey also noted that 17% of businesses suffered ransomware attacks with 69% of those victims paying the fees. A small business could fold under such financial strain.

Financing at the startup gets a business going, but companies need clear financial plans to ensure their businesses remain profitable. Pricing products or services, cutting spending, keeping workers paid, and paying operating costs all should fall into consideration when creating short-term budgets and long-term financial plans.

Marketing plans and analysis of competitors both help ensure the growth of businesses. Companies should differentiate their offerings enough to ensure that they meet customer needs. The Microsoft Zune music player was too similar to the iPod to attract customers away from the Apple product, contributing to the Zune’s failure.

5. Bad Management

Perhaps the biggest reason small businesses fail may be staring at you from the mirror.

Small business owners and entrepreneurs can get so focused on doing things a certain way, often because it worked for them in the early days, that they don’t evolve.

What got you to the point you’re at now, may not be what’s needed to move you forward, or get you through a crisis. A business owner may have the skills and knowledge to build and successfully launch a product to the market, but those are very different skills than building, managing and motivating a team over the long term.

It’s critical as a business owner to recognize you’re not an expert in everything and to surround yourself with people who can fill in the gaps. That could mean hiring the right people, working with a business coach, or seeking advice from your accountant. When it comes to starting and growing a business in Canada, failure is a risk. Planning and assistance from trusted advisors like the chartered professional accountants at Avisar can raise the chances of a business succeeding over time. At Avisar, we offer accounting, business consulting, and tax services to help businesses grow and thrive.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Mental Health in the Workplace and Beyond

Our guest author this week is Cameron Keller, a Professional Certified Coach with the International Coach Federation, and Principal at Kaleidoscope Training and Consulting.

Just a couple of weeks ago as I was part way through delivering a workshop on mental health in the workplace, a gentleman pulled me aside at a break to tell me his story. His mental health had become so poor that he had been having frequent thoughts of self-harm and suicide. The story was like far too many stories these days – stories that are becoming more frequent, more severe, and more troubling.

In my world, as an executive coach and business consultant I have come to realize that poor and declining mental health in the workplace is becoming the norm amongst entrepreneurs and executives, and then all the way down the line in organizations.

I originally trained as a mental health professional, earning a graduate degree in counseling/psychology in the 1990s. When I retired from the executive world nine years ago and started coaching and consulting, I had no idea that my mental health training would dovetail so critically with my coach training in serving my clients.

I am starting to believe that our industry should require a certain minimum training in mental health. Fellow coaches out there simply must be able to speak the language of mental health, understand signs and symptoms, recognize that stigma and other things become barriers to care, and recognize that recovery is possible.

We have too many leaders living with high levels of anxiety, utilizing substances, and navigating through pain, loss and loneliness in their personal lives that negatively impact their abilities to perform at the highest possible level at work.

I have been saying for years now that once someone has been on my coaching roster for a handful of months and we develop a deeply trusting relationship, the topic of mental health almost always emerges in some form. I estimate that approximately 70% of all coaching topics that my clients bring to me on a weekly basis have direct links to their own mental health. If not their own mental health, it’ll frequently be about the mental health of a key colleague or a family member. Because things happen in the context of a system, the indirect impact in a family or workplace of someone else working through a mental health challenge can be significant.

Canada was in a mental health crisis long before the pandemic. The impact on the workplace of increased absenteeism, presenteeism, and turnover has been huge. Now, just recruiting people to the workplace is a challenge due to the labour market.

I have become a true believer that employers that pay attention to workers’ mental health and wellness will become the employers of choice. And the good news is that there is a lot that an employer can do to promote mental health in the workplace. I am fortunate enough to work with a few CEOs and senior leaders that are investing in meaningful ways in their teams’ mental health.

What about the impact of the pandemic? It’ll be a long time before we’ll really know, but a recent news release from the Canadian Medical Association (CMA) about the mental health of physicians and health learners is worth looking at as I expect there are a lot of cross-industry similarities.:

60% of physicians and residents indicate that their mental health has worsened since the onset of the pandemic
Nearly half of respondents (48%) screen positive for depression, up significantly since 2017 (34%)
One-quarter (25%) of physicians and residents experience severe (10%) or moderate (15%) anxiety
More than half of physicians and medical learners (53%) experience high levels of burnout
Nearly half (49%) of respondents are considering reducing their clinical work in the next 24 months

More than one-third (36%) of respondents have had thoughts of suicide at some point in their lives, and 14% have had thoughts of suicide in the last 12 months
Moral distress is pronounced among physicians and medical learners, with one in five saying they have felt it “very often” or “always,” and a further 33% saying “sometimes,” since the start of the pandemic
Nearly half of physicians (47%) report low levels of social well-being — feeling that you have something important to contribute to society, for example, or have a sense of belonging in a community — a proportion that has significantly increased from the 2017 survey (31%)
Eight in 10 (79%) physicians and medical learners score low on professional fulfillment; less than six in 10 physicians and medical learners indicate being satisfied with their career in medicine

Again, this is just from one profession, but it does paint a picture. We know that approximately 50% of Canadians will experience a mental health issue in any given year. And, by that, I am not talking about the Monday Morning Blues. I am talking about something that is having a significant impact on the individual’s ability to perform well in one or more important areas of life. This stuff is real and has touched every person reading this article, directly or indirectly.

Supporting mental health in the workplace

First, if you are reading this and you know you are not doing well in your mental health, the first step is to speak up.

Speak at the very least to a friend or family member who you can trust. You should also contact a professional – your GP is one place to start, or contact a Registered Clinical Counsellor, Registered Marriage and Family Therapist, Registered Social Worker, or a Registered Psychologist. It’s important to understand that “it is okay not to be okay…” however, it’s not okay to do nothing about it

Second, if you are a business leader responsible for others, make a commitment to talking about mental health at a team meeting. It is important to remind people they are not alone and that help is available. Everyone deals with some challenges associated with mental health. Speak with your fellow leaders and determine some meaningful steps you can take in discussing mental health in the workplace and supporting your staff to access mental health support. You may consider bringing in a professional to do some training that will help individuals in the workplace have open conversations about mental health, without the stigma.

Keep in mind that Mental Illness Awareness Week is October 2 – 9, 2022 here in Canada. You could use this important opportunity to launch an awareness campaign at your workplace to promote conversations on the important topic of mental health and mental health awareness!

Cameron Keller is an Executive Coach and Consultant specializing in business growth and creating psychologically healthy workplaces. He has walked the walk of the executive world himself and knows what it’s like to carry large-scale responsibility for national initiatives. Cameron is recognized nationally for a number of significant achievements including the implementation of Canada’s first-ever Mental Health Strategy, the implementation of numerous national workplace mental health training initiatives, and the implementation of Canada’s National Standard for Psychological Health and Safety in the Workplace. He weaves in topics of mental health and wellness in his work with individuals who want to perform at the highest level possible in business and leadership.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Business Insurance 101

Running your own business comes with a lot of responsibility (not to mention risk), and often, new business owners end up making mistakes when taking out an insurance policy—mistakes that can harm the business and incur problems down the road. Most start-ups and small business owners know how important it is to insure their company and their employees, but it’s new territory. Let’s make it simple.

If you have a physical location for your business, there are nine standard components that you should include in your business insurance:

1. Property Coverage

This covers physical damage by fire, windstorms, water damage, theft, and more. It’s based on the replacement value of our fixtures, equipment, and leasehold improvements and also needs to include your stock value. Coverage is also written on a broad form basis, and damage caused by damage resulting from sewer backups, floods, and earthquakes are optional additions.

2. Equipment Breakdown

Do you run equipment of any kind including computers? If your answer is yes, keep reading! If not, you can skip to number three. Answer the following:

Is your equipment susceptible to electronic damage, power surge or breakdown?
Are you heated by a commercial boiler?

If you have answered yes to either of these, you should carry equipment breakdown coverage.

3. Business Interruption

This is a big one. While property insurance replaces your property, in the event of a fire, flood, or earthquake, you’ll likely be out of business (and cash flow) while you rebuild. Business Interruption pays fixed costs that continue even if you are not operating, including your wages, leases that continue, bank payments, and lost profit.

4. Crime Coverage

Better safe than sorry—yes it’s cliché, but crime coverage protects your business in the event of employee dishonesty (theft), as well as coverage for stolen cash, counterfeit currency, and forgery. There is also coverage available for phone transfer fraud and computer fraud, but this varies greatly by insurer. Be sure to ask what your options are and what insurance is available to you.

5. Commercial General Liability

This covers property damage and bodily injury caused in your premises, your operations, or from your products. The minimum limit included is $2,000,000, but many leases or supplier contracts require higher limits. The best thing you can do is ask! Too often, people don’t ask and end up in an unfavourable situation.

6. Tenants’ Legal Liability

If you cause damage to the premises you occupy by fire, smoke, water, or other damage, your landlord’s insurance will pay, and then seek you for recovery. Accidents happen, and it is best practice to be prepared.

7. Professional (or Errors & Omissions) Liability

Professional liability insurance protects for financial losses arising from acts, errors or omissions made in the rendering of services. This is a vital form of coverage that protects against financial losses resulting from lawsuits initiated by clients. These losses not only include damages awarded for successful claims, but also the legal costs of defending against these claims (successful or not). Traditionally this coverage was limited to recognized and designated professionals, but this has been expanded to including all consultants, and even manufacturers: this coverage can protect you if your project fails to meet manufactured specifications. Most policies do not include professional liability and we would be happy to discuss it with you.

8. Building Glass

How many cracked windows have you seen? A bird flies into the glass, an errant soccer ball breaks a window pane, a delivery box smashes into a glass feature—it happens, and trust us, some of the scenarios are downright strange. Even if you don’t own the building, most leases make tenants responsible for damage to windows or doors. Many policies cover glass as an extension under the property insurance, but a $1,000 deductible applies, so you are essentially ‘self-insured’ for any broken windows.

9. Cyber / Privacy Breach Liability

This is a newer coverage and is a separate topic on its own – but you need to think about losses you could suffer if you accidentally release information on your clients or supplies due to a break-in of your business, loss or theft of a laptop, or a virus or ransomware hack. We are all aware of these risks but most business owners haven’t considered the extent of the risk. Some business policies include a low limit of coverage, but this is something you should discuss in detail with your insurance professional.

Business Insurance 101 Summary

Insurance needs vary from business to business, depending on your industry, the size of your company, and multiple other factors. Before getting business insurance, make sure to familiarize yourself with each of the coverage types we touched on, and then sit down with a professional. Have a list of questions, and meet with an insurance professional who understands your specific type of business. There is no (effective) one-size-fits-all type of business insurance, and trust us when we say that insurance for a farm is a lot different than insurance for a cafe.

Have questions about business insurance? Contact Janzen Insurance—because if you haven’t noticed, we love to talk about insurance!

Our guest expert is Andrew Janzen of Janzen Insurance. This article originally appeared on the Janzen Insurance blog.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.