Canada’s productivity gap is buried in paperwork

Cinzia Bazzo, Managing Director of Canada, Sage

Canada has spent years searching for ways to improve productivity. One opportunity is hiding in plain sight: the way businesses get paid.

Canadian businesses are losing billions of dollars a year. Not just to bad debt, fraud or trade disruption, but to the slow and manual methods most of them still handle bills.

New Sage research, based on a survey of 2,002 Canadian businesses, found 79 per cent still send PDFs or email invoices that someone still needs to process manually. Nearly a third still use paper. Only seven percent use e-invoicing, compared with 17 percent in the United Kingdom and 32 percent in the European Union. Forty-two percent have never heard of it.

That gap is costing Canada time, cash, trade and growth.

The solution is e-invoicing. It skips the PDF, moving straight from the supplier's accounting software into the customer's accounting software. Nobody retypes it. It's checked for errors and fraud before anyone pays, and both sides can see where it stands. It does for business bills what Interac e-Transfer did for the cheque. Yet Canadian adoption lags.

Nearly three-quarters of business owners and senior leaders spend time dealing with invoice problems every month. In countries where e-invoicing is common, businesses get much of that time back. For a typical small Canadian business, that's about five and a half hours a week, worth roughly $21,600 a year.

If every Canadian business switched, the time saved would be worth $82 billion annually, or 2.5 per cent of GDP. Canada has spent a decade searching for productivity gains. Here's one sitting in our inbox.

Statistics Canada estimates that Canada's productivity gap with the United States has widened by 26 percent since 2000, and the federal government's 2025 budget identified weak productivity as one of the country's central economic challenges. Every hour spent chasing a payment is an hour taken from customers, products and growth, and across the economy those hours add up.

Canadian SMEs need cash to compete. Yet half of Canadian businesses say late payments are hurting their cash flow. One in five say it makes GST/HST and other essential bills hard to pay, and 17 percent say it makes payroll hard to meet.

In places such as the EU, where e-invoicing is adopted, payment arrives about four days sooner. In Canada, that would free up about $21 billion in overdue payments.

Nearly half of Canadian businesses have also experienced invoice fraud, and one in five has paid a fake invoice. A PDF is easy to alter. A verified e-invoice is much harder to fake.

The rest of the world is moving quickly. Italy has required e-invoices between businesses since 2019. Belgium, Poland and France made them mandatory this year. Germany is next. The United Kingdom follows in 2029, followed by the rest of the European Union in 2030.

With 38 per cent of SMEs naming U.S. tariffs and trade disruption as a top barrier, Canadian businesses are increasingly looking to access new markets. But many exporters are already encountering different invoicing requirements from customers abroad. One in five say a foreign customer has required them to use a specific invoicing portal, and 16 per cent have been asked to send invoices in a particular electronic format.

Without a Canadian framework that aligns with the systems our trading partners use, exporters are left to navigate those requirements on their own.

E-invoicing is also a first step toward making Canadian SMEs stronger digitally. In Europe, nine in 10 businesses that adopted e-invoicing went on to adopt other digital tools such as cloud software and AI.

A country that wants its small businesses to scale must help them move beyond retyping PDFs.

Ottawa has been here before. In 2021, the Canada Revenue Agency told its incoming minister it was looking at e-invoicing and that it could improve compliance and cut paperwork for small and medium-sized businesses. 

That opportunity is even more relevant today.

The federal government should launch a national consultation with industry, the provinces, standards bodies and the CRA to develop an interoperable national e-invoicing framework. One that works across provincial lines, connects with the systems our trading partners already use, and gives small businesses the support they need to switch.

A national framework would make Canadian firms more productive, strengthen tax compliance and help shut down invoice fraud.

Canada's small businesses need to be ready to compete in an increasingly digital economy. Right now, they're stuck in paperwork.