As small businesses recover from a global pandemic, widespread inflation and higher turbocharged interest rates, a new report outlines the substantial benefits available to Canadian entrepreneurs who embrace emerging technologies. 

Recent analysis by five economists, published in the Intuit QuickBooks Small Business Index Annual Report, found small businesses that use new digital tools are overwhelmingly more efficient and report higher revenue, oftentimes, more profitable. Emerging artificial intelligence (AI) technologies and other digital tools allow entrepreneurs to improve productivity and reduce costs through areas like task automation, which allows for an enhanced customer experience and more optimized business model. 

Nearly 75 per cent of small companies that manage more than eight areas of business with digital tools saw productivity gains over the past year, according to the report. Out of these businesses, more than half (59%) reported increased revenue over the same timespan. 

The report identifies AI as the primary engine behind this growth. “We are witnessing an unprecedented transformation,” the report states, noting that AI is allowing small businesses to “compete on a more level playing field with larger firms” by offering tools – like predictive analytics – that were once accessible only to major corporations.

Entrepreneurs who adopt modern technologies are more likely to forecast positive future revenue growth and express confidence in their sales projections. The report underscores that for small businesses, embracing these innovations is essential for “growth, survival, and long-term success,” highlighting the importance of access to newer technologies. While Intuit QuickBooks found that 95 per cent of Canadian entrepreneurs have adopted digital tools such as websites, software, and social media platforms, only 52 per cent report using AI on a regular basis. Closing this gap represents a significant opportunity for small businesses to operate more efficiently and accelerate growth.

Nationwide, adoption remains low: only 16 per cent of small businesses report using AI in their day-to-day operations, and fewer than one-third use cloud services.However, the study found that women-owned businesses are the exception. Described in the report as a “driving force in digital transformation,” these entrepreneurs are adopting technology at a faster pace, resulting in “stronger growth and greater confidence in the future.”

These insights provide an opportunity for the federal and provincial governments, which can introduce programs to help more small businesses address their growing tech needs, particularly including the adoption of AI-powered digital tools. Helping entrepreneurs utilize this technology will help create efficiencies that, in turn, will strengthen the domestic small business community and bolster the overall Canadian economy. 

Other notable findings from the Intuit QuickBooks report determined Canadian entrepreneurs are also increasingly reliant on credit cards. In fact, 64 per cent of entrepreneurs reported using either a personal or business credit card to help finance their company over the last year, more than personal savings, lines of credit, and traditional bank loans — combined. 

“In challenging times, access to credit becomes a critical determinant of a business’s ability to sustain operations and foster growth,” reads the report. “Due to their accessibility, flexibility, and ability to address immediate financial needs, credit cards are a vital source of financing for small businesses.” The Intuit Quickbooks report identified a narrative emerging across Canada, the U.S., and the U.K. In order to grow, small businesses need access to capital, but they can be increasingly viewed as high-risk borrowers by banks, especially during challenging economic periods. 

As a result, banks are reluctant to offer financing at the same level or flexibility as credit cards. The report found that last year, a majority of Canadian small businesses charged more than 25 per cent of their expenses to credit cards, while one in 10 relied on credit cards to cover more than 75 per cent of their total expenses.

The report acknowledges that credit cards have an important role to play. In fact, in the US, small businesses with more access to credit card financing were found to grow faster than those that did not. But it also warns that greater reliance on credit cards can carry heightened risks for some entrepreneurs who are not able to clear their balances, as they are now more likely to face higher monthly interest payments. Anonymized data from 677,000 entrepreneurs found that average monthly credit card interest payments have risen, and the number of small businesses paying the highest interest amounts (more than $450 per month) has grown, reflecting the impact of higher borrowing costs.

This trend highlights a clear opportunity for governments and industry to expand access to diverse financing options. Innovative products offered through fintechs and online lending marketplaces can provide more flexible, competitive, and accessible funding, particularly for early-stage businesses and entrepreneurs, helping to address a critical gap in Canada’s small business financing ecosystem.

Without swift policy change, the Canadian small business community is left financially vulnerable, a worrisome thought considering the country’s smallest businesses create 17 per cent of all new jobs in Canada, despite having only seven per cent of the overall employment share, improving financing mechanisms for the Canadian small business community is crucial. 

You can find more data-driven insights on small business financial health, taxation, and economic resilience in the Intuit QuickBooks Small Business Index Annual Report. 

Paid for by Intuit QuickBooks. 

The views and opinions expressed in this article are those of Intuit Quickbooks and do not necessarily reflect the official policy or position of iPolitics.