Feeling the Squeeze? How to Restore Profitability in Your Small Business
In 2026, Small Businesses Are Growing, But Rising Costs Are Still Squeezing Profits. Is Your Small Business Feeling the Pressure?
More Canadians are starting and growing small businesses, but many owners are still facing a familiar problem: costs continue to rise.
Fuel, insurance, taxes, payroll, supplier prices, software subscriptions and other operating expenses are all taking a larger share of your revenue. Even when sales are increasing, those additional costs can make it feel like there is never any extra money in the bank.
If you're feeling the squeeze financially as a Canadian small biz, you're certainly not alone.
If your business is busier than ever but your cash flow does not reflect it, it may be time to look beyond your total sales and review your margins more closely.
More Sales Do Not Always Mean More Profit
Revenue tells you how much your business earned before expenses. Profit tells you how much remains after those expenses are deducted.
A business can increase its sales while its profit stays the same (or even decreases). For example, you might bring in more revenue while also paying more for materials, wages, insurance, fuel and other operating costs (thanks inflation!).
That is why it is important to regularly review your Cost of Goods Sold (COGS) as well as any Overhead/Operating Expenses. AKA - what it costs to deliver your product or service. If your expenses have increased but your prices have remained unchanged, your profit margin may be shrinking without you realizing it.
Where does QuickBooks Online come into play? Well, your bookkeeping reports are exactly what will help you identify where this is happening. In this post, we'll tell you 5 areas to look at for profitability and the QuickBooks Online report that will provide you that information.
Get this post in a handy downloadable checklist:
Have Your Supplier Costs Increased?
Supplier price increases can add up quickly, especially when they happen gradually.
In QuickBooks Online, review your Expenses by Supplier Summary and compare it with the previous year. This can help you identify changes in spending by supplier and determine which vendors are costing your business more.
When reviewing the report, ask:
• Are you purchasing more from this supplier, or have their prices increased?
• Are shipping, delivery or service fees higher?
• Are there alternative suppliers worth considering?
• Could you negotiate better pricing or payment terms?
• Do your own prices need to be adjusted to account for the increase?
A higher total is not automatically a problem, particularly if your sales have also grown. The goal is to understand why the cost increased and whether your current pricing still leaves enough room for profit.
Are You Charging Enough for Your Time and Expenses?
Pricing should cover more than the obvious cost of completing the work.
Your prices need to account for:
• Employee wages and payroll costs
• Materials and supplies
• Travel time and fuel
• Software and administrative expenses
• Insurance
• Equipment maintenance
• Unbillable time
• A reasonable profit for the business
If your accounting setup allows it, review the Profit and Loss by Customer report and compare it with the previous year or another relevant period. Job costing is your friend here. If you haven't started doing this with QuickBooks Online, now is the time! This can help you assess which customers or jobs are generating the most revenue and whether the work remains worthwhile.
A customer who generates a large amount of revenue is not necessarily your most profitable customer. Their work may require additional hours, frequent revisions, more materials or higher administrative costs.
When you understand customer profitability, you can make better decisions about pricing, service packages and the type of work you want to pursue.
Which Recurring Costs Have Quietly Increased?
Recurring expenses are easy to overlook because they are often automatically charged to a credit card or withdrawn from a bank account.
Review your Expenses by Supplier Summary month over month or year over year to identify increases in subscriptions and ongoing operating costs.
What to look for:
• Software you no longer use
• Duplicate apps or services
• Plans that could be downgraded
• Promotional prices that have expired
• Monthly services that are now available at a better annual rate
• Recurring charges that should have been cancelled
Each individual expense may seem small, but several unnecessary subscriptions can make a noticeable difference over the course of a year.
Are All of Your Products or Services Still Profitable?
Some products or services may be much more profitable than others.
Review your Sales by Product/Service report and compare it with the previous year, quarter or another relevant period. This can help you see which offerings are performing well and which may need attention.
Things to consider:
• Material or labour costs have increased
• Certain services take longer than expected
• Discounts are reducing your margins
• Some offerings create significant administrative work - what can be automated?
• Your pricing accurately reflects the value and cost of the work
• A product or service should be repriced, changed or discontinued
This report is most useful when your products, services, customers and expenses are being tracked consistently in QuickBooks. If the information has not been categorized correctly, the report may not tell the full story.
Are Overdue Invoices Affecting Your Cash Flow?
A business can show a profit on paper and still struggle to pay its bills.
If you use accrual accounting, income may appear on your Profit and Loss report when an invoice is created, even if the customer has not paid it yet. This can create a gap between reported profit and the cash that is actually available.
Review your Accounts Receivable Aging Summary and compare it with the previous month. This report organizes unpaid invoices based on how long they have been outstanding.
Pay particular attention to:
• Customers with multiple unpaid invoices
• Balances that are more than 30, 60 or 90 days overdue
• Customers who regularly pay late
• Invoices that may not have been sent or received
• Disputed charges or missing information holding up payment
Following up consistently can improve cash flow and reduce the risk of an invoice becoming uncollectible. Clear payment terms, automated reminders and easier payment options can also help customers pay sooner.
What Should You Do With the Information?
Reviewing reports is only useful if the information leads to action.
Depending on what you find, your next steps might include:
• Increasing prices
• Renegotiating supplier contracts
• Cancelling unused subscriptions
• Changing your product or service mix
• Updating customer payment terms
• Following up on overdue accounts
• Building upcoming cost increases into your budget
• Improving how income and expenses are tracked
You do not need to make every change at once. Start with the areas having the greatest effect on your profit and cash flow.
Make Financial Reviews Part of Your Routine
Do not wait until tax season to find out how your business performed.
Monthly or quarterly financial reviews can help you identify rising costs, shrinking margins and cash-flow problems before they become much larger issues. We've put these 5 questions and the corresponding report names into a handy downloadable resource for you. Keep them on hand as part of your regular reviews.
We know your time as a small business owner is valuable. At Simcoe Office Solutions, we help business owners maintain accurate books and understand what their financial reports are telling them.
If your books are behind, your reports do not appear accurate or you are unsure which numbers to review, we can help you get a clearer picture of your business.
More sales can be exciting, but profitable and sustainable growth is the real goal.
Contact us to learn how professional bookkeeping and reporting can help you make more informed business decisions.
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