How SMEs can navigate the tariff storm?
The U.S. has unleashed a new wave of tariffs on imports, and SMEs find themselves in the eye of the storm. While companies of all sizes will feel the pinch, smaller firms are bearing a disproportionate brunt. Unlike multinationals that can spread out costs or negotiate with suppliers, SMEs run on thinner profit margins with far fewer buffers for sudden cost hikes. A 10 percent jump in input costs is part of business for a Fortune 500, but it can wipe out an entire month’s profit for a family-run manufacturer. In short, what might be a nuisance for a big player can hit a small business like a major storm.
Why are small businesses more vulnerable?
Several factors make SMEs more vulnerable to tariff shocks. For one, they often depend on a single supplier or market and cannot easily switch suppliers or absorb significant cost increases when tariffs strike. In contrast, a large company might pivot to alternate sourcing. Secondly, small businesses have less financial slack. Thin cash reserves and limited access to credit mean they can’t easily weather higher upfront costs. This lack of a cushion turns tariffs into an immediate threat to liquidity and stability.
Yet, despite these challenges, SMEs are not powerless. In fact, agility is one advantage smaller companies have over giants. To survive this tariff storm, business owners must double down on actionable insights and financial foresight – essentially, know your exposure and plan ahead. Drawing from some of ACCA’s latest guidance, here are key strategies to help businesses stay resilient:
Conduct a tariff exposure audit: Start by taking stock. Inventory key products and materials that face new tariffs, either directly or through your suppliers. In our latest insights, we highlight the importance of mapping not just your immediate suppliers, but your entire supply chain, including second- and third-tier sources. Only with full visibility can you see where the real vulnerabilities lie, and focus your mitigation efforts where they matter most.
Re-forecast under multiple scenarios: Tariff volatility demands financial agility. Recalculate your budget under different scenarios - status quo, moderate, and worst case. Stress-testing your business in this way, as we recommend, helps you see at what point you would need to adjust pricing, cut discretionary spending, or restructure supply chains. Planning for multiple outcomes today means you won’t be caught scrambling tomorrow.
Shore up your cash flow: Cash is the ultimate shock absorber in a volatile environment. Tariffs can squeeze liquidity long before revenue catches up. That’s why we urge SMEs to proactively strengthen their cash positions - whether by building reserves, securing flexible credit lines, or renegotiating payment terms with suppliers and customers. Every extra day of working capital you can unlock becomes a buffer against external shocks.
Review supply chain alternatives: Look for ways to tweak your supply chain to reduce tariff exposure. In our latest commentary, we stress the importance of supplier diversification and local sourcing where possible. Even if you can’t replace every input, having secondary options reduces dependency and spreads your risk. The best time to explore alternative suppliers is before you desperately need them.
Invest in real-time visibility: Timely, accurate financial information is crucial when costs can change overnight. Investing in cloud-based accounting or ERP tools allows businesses to model scenarios quickly and see the real-time impact of tariff changes on margins and cash flow. We see this digital agility as a critical advantage: the faster you can detect shifts, the faster you can pivot and protect your business.
Lean on your accountant’s advice: Navigating tariff impacts is complex, and your accountant can be an invaluable ally. At ACCA, we see professional accountants not just as financial stewards, but as strategic advisers who help businesses chart a steady course through uncertainty. From running scenario analyses to strengthening cash flow, a good accountant can turn financial data into actionable decisions. Bringing them into your planning early can mean the difference between falling behind and staying in control.
Tariffs undoubtedly pose a serious challenge, but with the right financial strategies SMEs can navigate the storm – and even find ways to thrive. Companies that embrace sound planning and agility will not only survive, but can emerge stronger. By taking the proactive steps above and treating accountants as critical allies, an SME can turn a tariff crisis into an opportunity to become more efficient and resilient. In fact, the most agile businesses may even find silver linings; for example, capturing market share if less-prepared competitors falter. The bottom line: good financial stewardship and strategic adaptability are the best antidotes to tariff troubles.
About the Author:
Kush Ahuja, appointed Head of Eurasia and the Middle East at ACCA in 2024, brings a dynamic blend of vision and experience to the role. Previously, he spearheaded ACCA’s growth strategy in India as Associate Director, working closely with global teams to expand the organisation’s footprint and impact across the region.
