The recent tariffs implementation is a hot topic among financial professionals and business owners. How are these tariffs affecting businesses, and more significantly, how do they impact credit collection?
This article takes a closer look at the recent tariffs, exploring their effects on businesses dealing with credit risks and late payments. We shall also discuss whether credit collection services can help you in such a situation.
A Brief Recap of the Recent Tariffs
Tariffs aim to improve domestic manufacturing. They are designed to protect industries in the USA by making imported goods more expensive.
While most of the tariffs began to change during 2018, they are back in focus this year again. New tariffs have been imposed or announced on imports that are more than 1 trillion USD. This figure is projected to rise over 1.4 trillion USD as temporary exemptions for Mexico and Canada expired in April 2025. These involve duties on agricultural, copper, auto, aluminum, and steel products, among others. In retaliation, countries such as Canada, China, and the EU have responded with tariffs as well.
The Impact of Tariffs on Small and Medium Businesses
The present tariffs have increased raw material costs, such as aluminum and steel. This has led to higher finished goods prices. To illustrate this increase, let us use an imaginary supply chain for materials for metal roofs.
- A steel manufacturer bears increased costs because of tariffs. They pass this expense to a distributor.
- A company that shapes steel into roofing sheets also deals with increased costs and charges more to a distributor.
- Roofing distributors increase their rates for contractors buying these materials.
- A homeowner, who is the end user, now has to bear the brunt of rising prices when hiring a contractor.
The domino effect of this inflation is insurmountable for smaller businesses. They operate on narrower margins and usually depend on credit to buy materials. For them, late payments from end-users disrupt cash flow, which leads to a trickle-down effect on their accounts receivable (AR) department.
You can imagine how this scenario can repeat across industries affected by tariffs. The result is consistent. Payments will be delayed, and the financial strain will impact businesses. In such cases, a professional credit collection agency may take some of the weight off your shoulders.
The Impact of Tariffs on Credit
- Increasing Costs Slow Down Cash Flow
Higher prices aren’t the only cause and effect of tariffs. They impact the bottom line. Higher production costs increase the prices of products. When customers face increased costs, they usually delay payments or purchases. Businesses that are already operating on narrow margins get stretched AR cycles, slower cash flow, and a dash to ensure working capital keeps flowing.
- Looser Credit Terms Lead to Higher Risks
Despite the rising prices, many businesses offer more flexible terms to keep customers on board. While this can close a deal now, it opens the door to far more serious tomorrow risk the next day. This is especially true when the economy is crashing.
- Collections Become a Headache
When payments are delayed for a long time, it means more chasing customers for invoices. Managing delayed accounts manually becomes a hassle that consumes too much time. It also pulls focus away from growing the business and putting even more pressure on the in-house team. Here’s where credit collection service agencies step in to provide the help you need.
To survive and flourish in the present business climate, companies have to undertake proactive strategies to limit the problems caused by tariffs. Here are some useful approaches:
- Reinforce Credit Policies
Establishing stricter terms for credit and regularly evaluating the existing ones is crucial. Reduce the payment windows wherever you can and use discounts to incentivize early payments.
- Monitor Reports
Keep a close eye on aging AR reports. Using these reports to swiftly identify overdue accounts allows you to take action before the escalation of the delinquency. The faster you act, your chances of recovering payments increase.
- Streamline In-House Collections
Invest in effective internal processes that pursue late payments. Alternatively, you can outsource this function to credit collection service companies to support your team during periods of massive AR backlogs.
- Partner with a Collection Agency, Houston, TX
If in-house efforts aren’t working and yielding the results you want, work with collection agencies such as Nelson, Cooper & Ortiz, LLC. They can considerably improve the chances of debt recovery without damaging client relationships.
The tariffs will persist in presenting challenges for business, especially in AR management and supply chain expenses. There isn’t any one solution that will remove these problems. You will need to combine credit management, careful monitoring, and partnerships with dedicated collection agency services in Houston, Texas. This will make an astounding difference!
