The majority of small businesses in Canada use digital tools, but only 10 per cent have fully integrated them across operations, according to a report released Monday by the Canadian Federation of Independent Business.
The report, co-sponsored by Payworks and Sage, found that 92 per cent of small businesses use digital tools. However, many have not adopted them across all core functions, leaving productivity and growth potential untapped, according to CFIB.
The findings come as Canada’s productivity grew only 3 per cent over the last decade compared to 18 per cent in the United States, according to the report.
Return on investment
Over half of businesses, 55 per cent, saw returns on their technology investment within the first two years, with an average 29 per cent boost in productivity in the first year, according to the report. On average, for every dollar invested, businesses saw $1.60 in return.
Digital Leaders, defined as businesses that have fully integrated digital tools across all core functions, report $2.40 in returns for every dollar invested, which is 1.7 times higher than their less mature counterparts, according to CFIB.
“Digital transformation isn’t just a buzzword—it’s becoming a key differentiator in small business success,” said Marvin Cruz, CFIB’s director of research and report co-author. “While not a panacea, digital tools can help inspire content, speed up projects, and automate repetitive tasks, freeing up time to take on more clients or focus on other important work such as strategy or personalized marketing.”
Growing interest in AI
Nearly a quarter of SMEs, 23 per cent, have invested in generative AI tools over the past three years, and 25 per cent plan to do so in the next three years, according to the report. Interest in AI analytics is also rising, with planned investments set to more than double from 7 per cent to 16 per cent.
In the past three years, business investments mostly focused on accounting, cybersecurity and IT, according to CFIB.
CFIB’s research shows that SMEs using generative AI can double their time, gaining an extra hour for every hour they use it. On average, Canadian SMEs have saved 1.08 hours per day using generative AI, according to the report.
If even half of that time were reinvested into productive work, it could boost Canada’s GDP by $12.8 billion, according to CFIB. However, many small businesses face barriers including cost, lack of time and limited digital skills.
Barriers to adoption
“While there’s growing interest in adopting AI and overall technology, small firms are still early in the journey,” said Alchad Alegbeh, research analyst at CFIB. “Helping SMEs go from early adoption to deeper integration is the next frontier and a big opportunity for Canada’s economy.”
As Ottawa launches public consultations on its AI strategy, CFIB recommends policymakers raise awareness about available government programs and incentives for digital and AI adoption.
The organization also recommends introducing tax-based incentives such as investment tax credits, accelerated capital cost allowances or a return to immediate expensing, which would allow small firms to write off up to $1 million in capital expenses related to digital investments.
Other recommendations include providing tax relief such as reductions in corporate and payroll taxes to give SMEs financial space to invest in technology and training, and offering accessible guidance to help SMEs understand how AI and other digital technologies can support their business goals.
CFIB has 100,000 members across every industry and region in Canada.
