by Mark J. O'Donnell and Jim Schmersahl
All businesses grapple with new, unexpected challenges. This article will use the recently announced tariffs as a case in point, however, a similar approach may be used for other economic uncertainties.
The Trump administration has recently proposed and imposed tariffs on various imports from various countries, creating a cost wave across industries and generating uncertainty for small businesses. Until the tariff issues are settled, your accounting team and professionals can help you adapt to market conditions.
1. Precision in Expense Tracking and Analysis
As tariffs drive up costs for imported goods and materials, detailed expense tracking is more critical than ever. Accounting data can support decisions by:
- Identifying expenses impacted by tariffs
- Analyzing trends to identify cost increases related to tariffs
- Reviewing vendors and comparing their pricing to other vendors to mitigate tariffs
- Evaluating the ‘ROI’ of expenditures in light of changing costs
For instance, a business specializing in commercial construction may find that the cost of imported materials has increased due to tariffs. By tracking these expenses, the company can make proactive, informed decisions about sourcing and pricing strategies.
2. Cash Flow Management
Maintaining healthy cash flow is the lifeline of your business. Tariffs may affect both cash receipt and disbursement timing as customers and vendors react to the challenges of tariffs. Accounting professionals play a vital role by:
- Creating accurate cash flow forecasts for potential tariff-related cost increases and customer and vendor payment practices.
- Managing receivables and payables, especially from companies exposed to the impact of tariffs.
- Identifying potential cash timing problems.
- Implement procedures to build financial reserves in the event of potential supply chain disruptions.
- Monitoring your available line of credit. Keeping some ‘dry powder’ in your line of credit may be necessary for unexpected cash needs.
For example, receivables may indicate customers are delaying payments due to their tariff-related challenges. By acting quickly to address these issues, businesses can minimize cash flow problems that disrupt operations.
3. Dynamic Forecasting
Static budgets are particularly ineffective in the current economic climate. Accounting teams support businesses by:
- Creating realistic budgets reflecting the impact of tariffs on costs and revenues
- Updating forecasts to reflect new tariff policies
- Conducting scenario planning for various outcomes, including decreased customer demand
- Analyzing variances between actual performance and budgets to identify tariff-related impacts
- Providing data to support strategic decisions, such as whether to absorb increased costs or pass them on to customers
For instance, scenario planning might show how different tariff levels could impact revenue and costs. With this foresight, a business can adjust its pricing strategy, explore domestic sourcing options, or diversify its customers and products to mitigate risks.
Adapting to Tariffs
The 2025 tariffs are already having significant effects on businesses. Many are experiencing rising costs, disrupted supply chains, and increased customer price sensitivity. However, these changes also allow businesses to modify and optimize their operations.
Small business owners might consider:
- Reinforcing customer loyalty by communicating openly about tariff-related cost and availability issues
- Employee training to better manage tariff-related challenges
- Exploring domestic suppliers or suppliers from countries not affected by current tariffs
- Evaluating pricing strategies to balance profitability with customer retention
Conclusion
While the current tariff situation poses significant challenges for small businesses, it also provides an opportunity thru sound financial management. By focusing on precise expense tracking, robust cash flow management, and dynamic forecasting, companies can build resilience against economic uncertainty and gain a competitive advantage.
Accurate and timely financial information, coupled with these processes, provides useful information to deal with business challenges, including today’s international trade policies. By involving your accounting team and your accounting professionals, you can make better data-driven decisions.
Mark O’Donnell, CPA, is Partner at Schmersahl Treloar & Co. He can be reached at 314.966.2727. Jim Schmersahl, CPA, is a Partner at Schmersahl Treloar & Co. He can be reached at 314.966.2727.