Why Tariff Scenarios Should Be Included in Financial Planning

When you get into a good flow, it’s hard to change direction. Think about settling in with that page-turning thriller you’ve been meaning to read. Just when it gets good, something pulls you out of it: maybe you need to walk the dog, or you have an appointment you have to get to. It’s frustrating, isn’t it?

With the way tariffs are being changed and updated in the last six months, you might be feeling that same kind of frustration. Your business may have already had to change its plans, or update credit procedures to align with new expenses.

That’s why it’s so important for you to account for tariffs in your business’ financial planning. It's about more than reacting to chagnes as they appear: including tariffs in financial planning can help your business become more responsive, competitive and stable.

Accounting for Tariffs Helps Reduce Risk

It can sometimes feel like you’re at the mercy of a lot of external factors. You do everything you can to protect your business from risks like late-paying customers, compliance violations, bad debt and supply chain nightmares. But even when you’re doing everything right, something out of your control – like tariffs – can be a wildcard that disrupts your business and supply chains overnight.

Take a look at your suppliers and customers: what kinds of materials do they rely on? If any of them are hit particularly hard by tariffs, you could feel the impact quickly.

Our research has found that 43% of US manufacturers offshore production to China. And while that’s nothing new, recent tariff increases have meant that businesses with a heavy reliance on Chinese manufacturing are at a higher risk of cash flow and supply chain issues. In May of 2025, average US tariffs on imports from China had increased to 126.5%. Keeping a close eye on how tariffs could impact your customers and suppliers helps you prepare for those impacts in advance.

Including Tariffs in Financial Planning Can Help Improve Cash Flow

It’s no secret that tariffs hit your bottom line: they can raise costs, squeeze margins and unsettle your cash flow. Understanding how different tariff outcomes could impact expenses and revenue lets companies plan for those fluctuations and help you weather the storm. If you aren’t planning for tariffs alongside the other costs of doing business, it’s easy to be caught off guard when tariffs increase costs. And that can lead to some worst-case scenarios, like cash shortages, late payments or even defaults.

Imagine your business has planned for the rest of the year. You know where your money is going – between paying bills, expanding the business and the general cost of keeping things running, every penny is accounted for. But you haven’t factored tariffs into the plan. Suddenly, tariffs have raised the cost of just about every element of your business. That money has to come from somewhere, right? Now, you’re put in the terrible position of having to put off payments or otherwise divert money to keep up the status quo.

If you’d accounted for tariffs in your initial plan, you’d have been able to allocate cash, adjust credit terms or slow down spending. Your cash flow remains steady, so you can continue to pay your bills on time, fund growth and weather any storms that come your way.

Tariffs Are Part of Accurate Credit Risk Assessment

Don’t think about tariffs as one-off costs you have to deal with as they come. Tariffs are bigger than that: they’re part of the global economy and they can reshape the credit landscape. Sudden tariff hikes can be the thing that takes a company from “struggling” to “bankrupt.” If your credit models don’t adjust alongside tariff increases, you may be more vulnerable to things like bad debt without even realizing it. And with our research showing that 58% of businesses have seen increased long-term debt in the last 12 months, your business should take every opportunity it can get to avoid bad debt.

When you account for tariffs within your credit assessments, it marks a key change. Instead of simply reacting to tariffs as they become a problem, your credit policy becomes proactive and strategic. Your credit team can set more accurate credit limits, change adjust terms and prevent losses before they happen.

This is also where continuous credit monitoring becomes a powerful tool for your business. While you should definitely be running business credit checks on new customers, your work doesn’t stop there. Think about it: maybe you’ve taken tariffs into account now, but has it always been part of your credit processes? How might tariffs be impacting your existing suppliers and customers? Continuously monitoring those businesses to track whether they’re showing signs of struggling, like a fluctuating Days Beyond Terms (DBT), for example, helps your business stay one step ahead.

Accounting for Tariffs Can Make Businesses More Strategic

In our research study The Murky Waters of Overseas Manufacturing, 35% of respondents said they use less than 500 overseas suppliers in their supply chain. Overreliance on a particular supplier or location can be the difference between a company thriving under uncertain economic conditions and... not.

By anticipating potential cost changes that come with tariffs from specific areas, you can proactively renegotiate contracts, pass on some costs to customers where possible, or look at alternative options before everyone else is rushing to do the same. Avoiding that kind of reactive decision-making is exactly what including tariffs in your financial planning can do. When you analyze tariffs and the potential risks they bring to your business, you do more than just prepare. You’re setting up your business for long-term success and opening up new opportunities.

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About the Author

Lina Chindamo, Director, Enterprise Accounts, Creditsafe

Lina Chindamo is a Certified Credit Professional (CCP) with over 25 years of experience in credit risk management. She has held senior leadership roles with leading companies in multiple industries in the Canadian market such as Sony Electronics, Maple Leaf Foods, and Mondelez Canada. Her experience as a credit professional along with her current role as Director, Enterprise Accounts who works closely with c-suite partners and credit teams across all industries makes her a well-rounded credit professional who is well respected in our industry.