With new tariff policies dominating headlines, proactively managing risk is essential. The Fed’s July Beige Book underscores increasing concerns about the costs of imported goods, especially raw materials, which are forecasted to begin impacting consumers later this fall. The U.S. administration is threatening to impose new targeted tariffs on chips, drugs, and copper, planned for early August. Businesses must stay ahead of turbulence by monitoring cash flow and acting decisively to protect both the bottom line and customer relationships. Strategic action may not fully insulate your business, but it can help mitigate major impacts.
Cash is King
The most important step when facing uncertainty is to assess and protect your cash position. Tariff-related disruptions, inventory purchases, or reshoring investments can quickly strain working capital. Without adequate liquidity, even well-laid plans are doomed to fail. Turnaround consultants often implement a 13-week cash flow model during a crisis. It’s also valuable for healthy businesses navigating uncertainty.
A 13-week cash flow provides a rolling, short-term forecast of your business’s inflows and outflows. It lets you see when and where cash might run thin and helps guide decision-making around expenses, vendor payments, and customer collections. This visibility is crucial if you’re preparing for unpredictable cost fluctuations or revenue shifts due to market turbulence.
Once you have this short-term visibility, begin evaluating opportunities to free up working capital. This may include:
- Accelerating receivables
- Negotiating extended payment terms with suppliers
- Pausing non-essential capital expenditures
- Securing or expanding credit facilities
When cash is tight, it’s easy to be reactive, but in turbulent times, you need to act strategically, with confidence. Gaining visibility into your current and future cash position will help you make smart decisions in the long term.
Diversify Supply Chains Proactively
- Build Inventory Buffers
The first step when facing tariffs is to build inventory buffers. Tariffs may be reversed through negotiations. By increasing your stock of critical goods now, you can weather temporary storms without immediately passing costs onto customers. This buys time to implement strategies like nearshoring or reshoring, and to communicate intentionally with your customers. However, watch your cash position carefully and avoid overextending.
- Explore Nearshoring and Reshoring
If your business relies heavily on China or other tariff-affected regions, consider nearshoring to exempt countries. For businesses with enough scale, bringing manufacturing home may be even more attractive. Though costs can be higher initially, you gain efficiency in transport, oversight, and risk. Look for synergies in logistics and overhead that make domestic operations more efficient. - Pursue Local Incentives
Don’t go alone—many local businesses are facing similar pressures. Use local associations and industry groups to lobby for tax breaks, infrastructure support, and subsidies that offset higher domestic production costs or tariff-related increases. Many localities actively support job-creating reshoring efforts.
Communicate Rising Prices with Transparency and Empathy
Pick up the phone. Call your key customers directly. Email announcements feel cold and transactional, whereas phone calls demonstrate respect and personal investment in the relationship. This agility is invaluable when navigating tariff-driven uncertainty.
Scrutinize Discretionary Spending
Review non-essential spending, such as travel, software, and entertainment. Evaluate if each line item delivers ROI or can be paused.
Be Intentional About Hiring
Hiring decisions matter more than ever. Before filling vacancies or adding roles, pause to evaluate actual needs. Ask: Can we eliminate the role? Offshore it? Automate it? If a position isn’t mission-critical, consider whether existing staff can absorb the duties, or if outsourcing or automation might be a better option. With AI nearing broader adoption, explore opportunities for increasing efficiency through automation or large language models (LLMs).
Lead Through Uncertainty with Strategy and Agility
Unexpected tariffs and cash constraints demand a proactive, confident response:
- Monitor liquidity with a 13-week rolling cash forecast.
- Free up working capital by accelerating receivables, extending payables, and pausing non-essentials.
- Diversify and buffer your supply chain by building inventory, exploring nearshoring/reshoring options, and securing local incentives.
- Communicate openly with customers through direct, empathetic conversations.
- Cut non-core spending across travel, software, and entertainment.
- Hire carefully—evaluate the necessity of each role and consider outsourcing or automation before adding headcount.
Taking these steps won’t completely shield your business from the effects of tariffs—but they’ll provide both breathing room and a strategic foundation to manage challenges effectively.
Market disruption also poses a unique opportunity for more agile firms with liquidity that are positioned to seize market opportunities from less prepared and liquid competitors. After the 2008 financial crisis, better prepared and capitalized homebuilders were able to consolidate market share by acquiring distressed competitors, equipment, and market position at cheaper valuations. Similarly, companies that manage their cash flow, diversify their supply chains, and build closer relationships with their customers will have the opportunity to leverage market instability into growth, positioning themselves to survive and thrive.
Joe Chevalier is the senior vice president of finance for the PEO division at OneDigital.
Photo courtesy Getty Images for Unsplash+
