Canadian small business sales fall for third quarter

Canadian small business sales fell 0.6% year on year in the June quarter, according to Xero, marking a third consecutive quarter in which sales were lower than a year earlier.

Xero's Small Business Insights report found sales were below year-earlier levels in eight of the past 12 months, although the latest decline was less severe than the 3.0% drop in the March quarter and the 1.3% fall in the December quarter.

Monthly figures showed a sharper swing within the quarter. Sales fell 2.7% year on year in April and 3.0% in May before rising 3.8% in June, which Xero linked to movements in petrol prices.

Fuel costs rose to just over $1.90 a litre in April and May before dropping below $1.70 a litre in June, the report said. That easing appeared to coincide with a pickup in consumer spending after budgets had been squeezed earlier in the quarter.

The report also pointed to continued pressure on payment times, underscoring the cash-flow strains facing smaller companies. Canadian small businesses were paid an average of 11.3 days late in the June quarter, broadly unchanged from 11.4 days in the March quarter but worse than the 10.5-day average recorded across 2025.

Time to be paid, measured from invoice issue to settlement, was 29.0 days in the June quarter. That was slightly better than 29.2 days in the previous quarter, but remained above the 27.1-day average for 2025.

Ashalee Mohamed, Country Manager for Canada at Xero, said the operating backdrop was likely to remain difficult for many owners.

"Canadian small businesses are likely to face continued economic uncertainty through the rest of 2026, with many business owners navigating ongoing cost pressures and cautious consumer spending. While some sectors may benefit from broader market trends, many small businesses will continue to focus on protecting cash flow, managing expenses and adapting to changing customer demand. Maintaining visibility into business performance and planning ahead will be key to helping small businesses navigate the coming months," Mohamed said.

Regional results

The report expanded its provincial coverage to include the Maritime Provinces, combining New Brunswick, Nova Scotia and Prince Edward Island into a single region. That grouping recorded sales growth of 0.2% year on year.

Alberta was the strongest-performing province in the data set, with sales up 1.0% from a year earlier. Ontario recorded a 0.3% decline, while British Columbia posted the weakest result, with sales down 1.7%.

Payment performance varied across the country. British Columbia had the shortest time to be paid at 25.7 days, improving from 26.9 days in the March quarter.

The figures were 28.4 days in Alberta, 30.0 days in Ontario and 31.8 days in the Maritime Provinces. The differences suggest that while some regions saw weaker sales, invoice settlement patterns did not always move in the same direction.

Economic backdrop

Xero cautioned that the June sales rebound should be treated carefully because late-reporting adjustments had recently overstated results and the month's figure was likely to be revised lower in future updates.

Louise Southall, Economist at Xero, said the data pointed to stagnation rather than recovery.

"Overall, the biggest positive from this data is that performance didn't get worse, but it is not improving much either. The continued geo-political conflicts and uncertainty have made conditions harder for Canadian small businesses, building on the impact of US trade policy since April 2025. Gasoline prices peaked in May, and while various ceasefire agreements have offered brief relief, none have been able to hold for more than a few weeks. The OECD expects the Canadian economy to grow just 1.2% in 2026, slower than the 1.7% recorded in 2025," Southall said.

The figures matter because small businesses account for a large share of private-sector activity in Canada, and weaker sales can feed through to hiring, investment and tax receipts. Higher fuel costs can also hit small firms twice by raising their operating costs and reducing the disposable income consumers have available to spend.

The data was drawn from aggregated and anonymised records from 12,000 Canadian small businesses using Xero's platform, covering sales performance, late payments and time to be paid. British Columbia's 25.7-day invoice settlement time was the best provincial result in the June quarter.