How does your organization react when the rules change overnight? This is the question facing finance leaders as they grapple with an unpredictable trade tariffs environment that's throwing carefully planned budgets and forecasts into disarray.
And it doesn't stop there. Tariff volatility ripples across the supply ecosystem, potentially increasing supplier costs and shipping expenses. Suddenly, a global procurement strategy becomes a game of damage control.
The result? CFOs are forced to shift from strategizing to reacting. Long-term planning, cash flow, and profitability can take a hit, threatening companies' competitive edge.
But this uncertainty can also be an opportunity for forward-thinking CFOs to innovate. Read on to learn how CFOs can address tariff challenges head-on, using insights, bold strategies, and advanced technology to stay ahead.
Key areas affected by tariff uncertainty – and what CFOs are doing to adapt
New tariffs are more than just an added line item in an organization's budget. Any change in tariffs has a direct impact on margins, global supply chain costs, working capital, vendor relations, and business continuity. Without a deliberate plan, these changes can leave finance professionals scrambling to deal with potential profit erosion, compliance complexities, and unpredictable cash flow. But for CFOs who are willing to tackle the disruption head-on, tariffs can highlight areas ripe for transformation.
Here's where finance and accounting teams feel the heat most – and where opportunities lie.
1. Supply chain accounting and costing
Tariffs can wreak havoc on vendor agreements and invoicing structures. Suddenly, questions emerge. Who's responsible for new tariffs? How do we adjust pricing to cover higher costs?
Here's how CFOs can respond:
Redraw vendor agreements to clarify whether sellers or buyers cover tariffs and taxes. For example, a delivered duty paid (DDP) contract shifts all tariff costs to the seller, while ex works (EXW) places them on the buyer
Update invoice templates to outline tariff-related fees clearly, reducing confusion and disputes
Be transparent with customers by proactively communicating tariff-driven price changes
Reevaluate sourcing strategies, material mixes, and make-or-buy decisions to offset tariff-driven costs
Track and mitigate cost impact by revisiting inventory valuation, recording tariff costs, and managing write-offs
The tech advantage: Enhanced e-invoicing platforms can calculate and track tariff-related costs, enabling accurate reporting. Additionally, advanced contract management tools can measure performance obligations and impact on revenue, while scenario-modeling tools can help teams adopt the right pricing strategies.
2. Transfer pricing and tax
In today's globalized economy, tariffs not only raise the cost base of goods but also complicate transfer pricing – the arm's-length principle that dictates pricing between related entities. To enable compliance with tax authorities while minimizing financial strain, finance teams can:
Use advanced pricing agreements to enable equilibrium pricing that minimizes cost and tax while being fair and compliant
Develop strategies to minimize the dutiable base, like excluding non-dutiable components
Allocate costs transparently so that the increased tariff-related costs are distributed equitably
Explore whether tariff-related costs are deductible under international and domestic tax laws
Adjust transfer pricing models to reflect new cost structures
Implement tax planning strategies to optimize foreign tax credits subject to double taxation treaties
The tech advantage: Compliance management tools that help codify tariffs, classify products correctly, and prepare detailed documentation can save enterprises from costly mistakes. Additionally, tax analytics has emerged as a potent tool to study tariff implications, review strategies, and enable continuous governance over global compliance costs.
3. Planning and forecasting
Static financial models won't cut it in today's volatile tariff landscape. Real-time adaptability and robust scenario planning are now must-haves.
Here's what finance teams are doing to stay ahead of the curve:
Scenario analysis to simulate how various tariff scenarios can impact profitability and operations, and adjust forecast numbers as well as business strategies accordingly
Sensitivity analysis to assess the potential impact of fluctuating tariffs on key financial metrics and proactively take action
Rethinking pricing strategies and discount and rebate programs, and boosting operational efficiency to offset rising costs
The tech advantage: Advanced data and intelligence can allow businesses to integrate tariff data into financial planning software and use analytics tools to reduce operational costs and monitor profit margins. Organizations that have invested in centralized data lake architectures possess a distinct advantage when it comes to scenario planning, particularly in adapting to tariff impacts. By consolidating structured and unstructured data from diverse sources, data lakes enable rapid access to detailed operational, financial, and supply chain information. This agility allows businesses to model various tariff scenarios, assess potential outcomes, and make informed decisions quickly. As a result, they can proactively adjust sourcing strategies, pricing models, and logistics operations to mitigate risk and maintain competitiveness in a fluctuating trade environment.
4. Working capital
When costs rise unpredictably, cash flow often becomes the first casualty. Here's how finance teams are safeguarding liquidity in turbulent times:
Optimizing the cash conversion cycle by renegotiating payment terms with suppliers and customers and reassessing discounting strategies
Securing short-term financing after weighing the cost of borrowing against the risks of stockouts, delayed fulfillment, or eroded margins. Partnerships with flexible lenders can make all the difference in navigating these short-term challenges
Real-time monitoring of key financial ratios, like the current ratio or quick ratio, to avoid surprises down the road
The tech advantage: Automated cost tracking through autonomous systems can help integrate cost data into pricing and financial models to reduce the margin for error.
Seizing the opportunity within tariffs
Tariffs won't disappear overnight, and companies that treat them as a permanent strategic variable – not a temporary roadblock – will lead their industries. By rethinking supply chains, renegotiating contracts, automating processes, and harnessing technology to drive insights and efficiency, financial leaders can turn tariff turbulence into a strategic advantage.
The time to act is now. Assess your processes, adopt robust solutions, and partner with experts who understand the nuances of finance, technology, tariffs, and global trade to prepare your finance and accounting functions to navigate uncertainty.
