Sunday, 31st March 2019 | Management
5 Ways the Canadian Tariffs on U.S. Goods Will Impact Small Business
It could be several years before the Canadian economy feels the fallout from the Canadian tariffs, but it’s imperative that companies stay one step ahead and address the potential impacts of the Canadian tariffs to small business now.
Current trade wars continue to dominate international news. While the headlines may seem far removed from the day-to-day operations of many companies, they could hit home for many small businesses in Canada. Local companies of all sizes that import goods from the United States could have to pay more for select raw materials, food products and other manufactured goods, as itemized in this list from the federal government.
Why? Canada is imposing tariffs in retaliation to those put forth by the United States on steel products and aluminum. However, the Canadian tariffs cover a wider range of items including several food products. It can oftentimes be difficult to determine a product’s origin when the supply chain encompasses many countries. But, in essence, any goods that are modified to some extent or packaged south of our Canadian border could be subject to these new tariffs.
Headlines like these can be daunting, but the impacts of Canadian tariffs on small business shouldn’t be ignored. If you run a small business in Canada, your very first step is to determine if any products you’re sourcing from the United States are on the list. Next, assess these five categories of potential impact:
1. Constraints to cash flow
One of the biggest and most over-arching impacts of the Canadian tariffs on small business is on cash flow. For companies of all sizes, cash flow can be considered oxygen to the business. So, when something threatens that life-giving supply, such as the Canadian tariffs, systems begin to slow down.
If the tariff situation is going to impact your business, you should see if there are ways to improve your cash flow management. Are there steps you can take to improve your receivables to better manage payables? This article by entrepreneur.com has great tips for both of these practices.
2. Effects on profit margins
If you are going to be affected by the tariffs, it’s key to analyze profit margins and cut fat. Here are three questions to help find cost savings:
- Can we reduce any of our expenses to counter-balance a higher spend on products that are subject to the tariffs?
- Can we bring any tasks in-house?
- Can we renegotiate a more favourable arrangement?
- Is there anywhere we can off-set our costs before we turn to raising our prices?
3. Possible price hikes
Increasing prices is usually a last resort for small businesses because of the potential negative reaction from buyers. However, at times, price hikes might be essential in order to remain profitable. This is especially true when suppliers increase their prices. If raising prices is something you are considering, first, analyze how your prices compare to industry averages. Also, evaluate how customers regard your products and/or services, and the amount of increase they’d tolerate. This can be done as simply as having a candid discussion is a few of your most loyal customers.
4. Impact to inventory
At any time of year, managing inventory levels is essential. But amid uncertain times or when costs are increasing, managing goods is even more critical because of the impact on cash flow of carrying a lot of inventory.
Given the current situation with tariffs, consider implementing additional inventory control measures—particularly if you plan to rollout price increases. This blog by infoentrepreneur.com outlines several inventory management practices, including batch control and minimum stock level. You can follow one, or combine a few methods.
Emphasis on communication
It goes without saying that businesses involved in imports and exports must communicate with each other. This is even truer right now with the tariff situation. Maintaining (or even enhancing) contacts and building your network can help you stay up to date with changing policies.
Liaising with a network of small business specialists like your local Chamber of Commerce can really pay off, too. Organizations like chambers and the BDC can help you cope with rising tariffs by passing on key information like how others have successfully adjusted their operations, available grants that might close the gaps and other resources.
Regardless of whether or not they’re here to stay, the impacts on small business of increased tariffs need to be addressed. Even though significant shifts to the economy will take several years to unfold, small businesses have to act now in order to ride out the changes.
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