Tariffs are no longer simply numbers on a spreadsheet. They're reducing your profit margins, causing supplier conflict, and requiring you to redo your whole budget. If you're an SMB owner or finance manager, you're certainly wondering how to negotiate this new normal—especially because US trade policies are constantly evolving.
Let's take a look at tariffs, how they affect your bottom line, and what practical measures you can take right now to safeguard your company.
Tariffs 101: A Quick Refresher
Consider a tariff as a charge on imported products. According to the Tax Foundation , these expenses are generally passed on to companies and consumers, rather than being borne by overseas exporters. According to the White House Fact Sheet , the Trump administration has put tariffs on commodities from Canada, Mexico, and China.
When you bring things into the United States, customs agents collect duties at the border. If you don't keep track of these additional costs, they might discreetly increase the cost of items, making your once-stable budget seem more like a changing target.
The Domino Effect on Your SMB
1. Budget & Forecasting Turbulence
○ Multiple budgeting scenarios may be required to account for shifting tariff regulations, including best-, mid-, and worst-case rates.
○ Profit Margin Pressure: Additional fees for importing supplies might reduce cash flow and lead to narrower profit margins.
2. Supply Chain Dilemmas
○ Stick with Your Current Suppliers: Accepting tariff prices may be easier in the near term, but it's dangerous if rates rise again.
○ Move to other countries. Lower or no tariffs may keep prices stable, but evaluating new suppliers takes effort (and trust).
○ When sourcing domestically, keep in mind that greater labor costs may offset transportation savings.
3. Impact on Tax Returns & Liability
○ Tariffs are considered 'extra' costs and are included in import bills rather than tax returns. However, they have an impact on the cost of items sold, which in turn influences your taxable revenue.
○ Accounting complexity: Maintaining correct records of tariff costs is critical for estimating tax obligations and avoiding overstatement.
Planning Ahead: A Blueprint for SMBs
1. Map Your Supply Chain
Document each supplier, the proportion of goods they offer, and where they ship. This picture will show you where the largest tariff threats are.
2. Run many scenarios.
Create a couple "what if?" budgets. For example:
○ Use current tariff rates as your foundation budget.
○ Will higher tariff rates impact profitability?
○\tLower tariff rates: Will you use the additional margin for expansion if discussions ease?
3. Reassess Your Pricing Strategy
With rising import costs, you may need to change your pricing to maintain profits. Communicate any increases to clients in a straightforward manner, particularly if you service the B2B sector.
4.Optimize Tax and Accounting Approaches
○ Track tariff expenditures individually to understand their impact on your financial performance.
○ Consult with tax specialists (like us!) to maximize deductions and credits that offset tariff expenses.
5. Stay Nimble
Tariffs are not fixed in stone. Keeping a careful watch on legislative changes enables you to pivot rapidly, renegotiate supplier contracts, or even seek new opportunities.
How We Can Help
Wading through policy revisions and calculating data may be time-consuming, particularly if you own a company. We are here to take the guesswork out of tariffs and assist you:
● Plan Better Budgets: We'll construct various forecast models to ensure you're prepared regardless of tariff changes.
● Assess Supply Chain Savings : Our staff can assist you in weighing the costs and advantages of transferring suppliers, including international or local options.
● Simplify Accounting : We optimize your tax approach and accurately categorize tariff expenditures to ensure accurate accounting.
Are you ready to lead your SMB through uncertain times ? Contact us immediately to set up a planning session that will put you in charge of your financial destiny.
