News and views

New and noteworthy information you can use

Fewer small businesses in Canada considering expansion

The Small Business Research Board (SBRB) reports that only 22 per cent of small businesses in Canada are considering expansion in the next 12 to 24 months. It is the second consecutive quarter that the percentage of owners and managers considering expanding their businesses has declined.

According to the fourth quarter report, the percentage of business owners and managers considering expansion dropped five points from the 27 per cent who were considering expansion during the third quarter of 2007. During the second quarter, 34 per cent said they intended to expand their businesses.

The study parallels the findings of the previous released SBRB report that the Canada Small Business Confidence Index (Canada — SBCI) declined to 36.67 or more than 8 points (18.5 per cent) during the fourth quarter of 2007 from the prior poll of business owners and managers.

The fourth quarter 2007 SBRB study, co-sponsored by Integrated Business Analysis (IBA), indicated that decreased plans for hiring during the next 12 months was the principal reason for the decline, even though declines also occurred in the two other categories comprising the index. The overall SBCI last reported during the third quarter of 2007 was 45. Nearly 150 businesses participated in the SBRB poll.

Of the 22 per cent who said they intend to expand, most owners and managers said they will concentrate on product and service offerings as well as customer service enhance-ments to grow their operations. Nearly one-third (31 per cent) of the participants said they will provide more services, 27 per cent will add new products and 19 per cent will enhance their customer service.

Concurrently, the same owners and managers will depend most heavily on staff training and implementation or enhancement of employee incentive programs to improve productivity. Improvements in existing automation and technology, adding more staff and adding more automation and technology trailed as the next three most important ingredients to increasing near-term productivity.

The latest information about the Small Business Research Board can be found at www.biznus.net.

Manufacturing, retail and distribution industries not ready for IFRS

The vast majority of Canada’s top financial executives don’t believe their staff is prepared for the conversion to International Financial Reporting Standards (IFRS) scheduled for 2011.

According to the IFRS Readiness — Executive Research Report by the Canadian Financial Executives Research Foundation (CFERF), the research organization of Financial Executives International Canada (FEI Canada) with sponsor Ernst & Young, the manufacturing, retail and distribution industries were the least prepared for the impacts of IFRS.

Responses to the survey were received from 510 financial executives across Canada covering a range of business sectors, including mining, oil and gas, financial services and manufacturing. Utilities lead the charge in terms of industry preparedness; 90 per cent said they had started assessing the impact of IFRS conversion. This is perhaps not surprising since utilities will be one of the sectors most significantly affected by the transition to IFRS because of how utilities account for revenue.

While 2011 seems far away, the Accounting Standards Board (AcSB) says Canadian companies should be in a position to disclose their plans for convergence in 2008.

“Our research shows that relatively few senior finance executives are aware of the differences between IFRS and Canadian GAAP, most have not briefed their audit committees, few have calculated the costs of conversion and a majority don’t yet know if their systems can handle the job,” Ramona Dzinkowski, executive director of the Canadian Financial Executives Research Foundation, says. The report also noted large organizations are somewhat ahead of the curve in implementing IFRS conversion teams, but that might not be enough. “When you consider that Canadian public companies may need to disclose their plans for convergence in their financial reporting for 2008, it becomes clear that businesses need to start developing a sense of urgency about getting ready,” Rafik Greiss, partner and IFRS leader at Ernst & Young Canada, says. “Readiness will not happen in one fell swoop. Early planning will help companies better manage the pain and effort that will be involved in getting ready. The difference between success and failure will be a well-defined plan. An ad hoc approach won’t cut it.” The conversion to IFRS by publicly accountable companies will have significant impacts not only on financial reporting, but broader business issues that extend across organizations and across industry sectors. CFERF’s report identifies best practices, current issues, and emerging challenges that companies of all sizes should be aware of in converting to IFRS.

“Two concerns remain dominant among senior financial executives — resource and time constraints, and the education and training required of staff who will be evaluating and implementing IFRS conversion,” Michael Conway, chief executive and national president of FEI Canada, says. “Financial executives do not know where to turn at the moment for training.”

A copy of the full report can be found at http://www.feicanada.org/files/cferf-IFRS-report%20Final.pdf.

Employment for newcomers to Ontario

Ontario is helping 3,000 skilled newcomers get opportunities to land jobs that match their qualifications and experience.

The McGuinty government is investing $27.4 million in 40 provincial programs that will help newcomers bridge their international credentials and experience into Ontario qualifications.

As part of Ontario’s five-point economic plan, the McGuinty government is continuing to make major investments in the education and skills training of Ontarians.

Elements of the various programs include:

• Projects that are offered in the following sectors: education, engineering, finance, health care, research and innovation, social work and trades.
• Projects providing occupation-specific language and technical training, mentorship, skills assessment and work experience needed for various professions.

As part of the Canada-Ontario Immigration Agreement, the federal government is contributing $8.1 million to partially fund some projects.

By 2011, all of Ontario’s net labour force growth will come from immigration. About 70 per cent of adult newcomers to Ontario have post-secondary education or training.  

Study finds Canadian business tax system complex and costly

A study by PricewaterhouseCoopers (PwC) shows that Canada’s business tax system is challenging the country’s ability to compete internationally.

The 2007 Total Tax Contribution survey is based on a framework developed by PwC in the United Kingdom and encompasses all taxes paid by a company as well as all taxes collected by the company from its employees and customers on behalf of governments. A company’s total tax contribution is therefore a measure of its total impact on government revenues.

The survey found that companies in Canada are subject to 49 different taxes and 18 other payments to governments at the federal, provincial and municipal level. Adding to the complexity of Canada’s tax system, companies are subject to more than 200 possible “taxing points” — the number of tax obligations a business would be required to fulfill if it were subject to all taxes in all jurisdictions.

On average, the companies that took part in the survey spent $2.1 million a year to comply with these taxes. The average time spent on compliance was 19,863 hours, which translates to 2,483 eight-hour days or the equivalent of 11 full-time employees dealing solely with tax compliance.

According to the survey, the tax burden on companies in Canada is significantly higher than the burden on businesses in the United Kingdom. U.K. companies pay or collect 21 different taxes, fewer than half the number of taxes encountered by companies in Canada.

“While recent tax reforms have produced real savings for many corporations, the tax landscape in Canada still presents numerous challenges,” Tom O’Brien, a tax partner with PwC in Canada, says. “Money and time spent on complying is money and time not invested in research and development, product development and other business improvements, which obviously hurts Canada’s overall competitiveness.”

In addition to taxes borne directly by companies, businesses make a significant contribution to government revenues through their obligation to collect and remit a wide range of other taxes. The 39 companies that took part in the survey collected a combined $19.8 billion in taxes in 2006 on behalf of all Canadian governments. For every dollar they paid in corporate income tax, survey participants paid a further $0.82 in other business taxes and remitted $3.41 in taxes collected from their employees and customers. The major taxes collected by companies in Canada, as identified by survey participants, were personal income taxes withheld from employees, fuel duties, GST and excise duties. According to the survey, a relatively small number of companies contribute the largest proportion of the total taxes borne and collected. The companies responsible for the 10 largest tax contributions in the survey (a quarter of the respondents) contributed 64 per cent of the taxes borne and 68 per cent of the taxes collected in 2006.

For more information, visit www.pwc.com/ca/ttc.

Costing and Profitability Study by the Business Research and Analysis Group

The Business Research and Analysis Group (BRAG) is a team comprised of academics and researchers dedicated to investigation and dissemination of current management practices. Its previous studies resulted in many articles published in professional journals and a book outlining best practices in the use of scorecards.

The group is now launching a study to review methods and practices undertaken by companies around the world to help them better understand customer, product and service cost and profitability measurement. The group invites organizations from private and public sectors to participate in this study by completing an online survey by July 31, 2008. All participants will be granted access to published results by the BRAG team following the survey.

For more information or to take the survey, go to www.bragstudies.com/cma

CMA Canada is a sponsor for the BRAG Costing and Profitability Study.

New Software

• Stonefield Query for Sage Accpac ERP and Sage Pro ERP Version 3.2.

Top