Kyriba’s Tips for Overcoming Tariffs with Working Capital Solutions

SAP organizations around the world are coming to grips with the potential of new tariffs from the U.S. government potentially affecting their business. Tariffs could increase the cost of goods, strain supply chain dynamics, and cause the values of certain currencies to fluctuate. The political winds affecting the tariffs can change on a day-to-day basis. This only adds to the increasing economic volatility that businesses must contend with.

Leading organizations cannot afford to stand idly by and wait to see how these tariffs might affect them – they need specific strategies to insulate themselves from any potential negative results. Finance departments must have a plan to better manage their assets, optimize liquidity performance, and set themselves up for continued success.

Overcoming Tariff Obstacles

To help organizations better manage tariffs, liquidity performance platform Kyriba highlighted five working capital solutions that can enhance cash flow and promote sustainable growth.

Supply Chain Finance (SCF) – To offset the effects of tariffs, suppliers (particularly those in markets with complex supply chains) can use SCF to gain access to favorable rates. Those with good credit can offer early payments to get access to lower costs of capital and more stable vendor bases.

Dynamic Discounting – Companies can also offer their suppliers earlier payments to access lower rates in a practice known as dynamic discounting. This practice is especially helpful for cash-rich organizations, allowing them to improve profit margins and lessen the sting of increased costs that tariffs may cause.

Receivables Finance – To enhance liquidity, Kyriba recommends that companies improve the speed at which they convert receivables into cash. CFOs can access funds that are locked in outstanding accounts receivable. By accessing increased capital, companies are better able to manage their business, improving agility which gives them better options to overcome tariff-related issues.

Factoring – Factoring is another solution companies can use to overcome issues with outstanding accounts receivable. In this practice, companies transfer their outstanding AR portfolio for a cash advance. This can act as a short-term solution, providing a financial buffer to deflect the price shocks that tariffs can cause.

Hybrid Working Capital Solutions – Organizations can also combine several different working capital solutions to find hybridized approaches to overcoming the impacts of tariffs. Whether that is combining a factoring program with supply chain financing to accelerate incoming cash, or adding together supply chain financing and dynamic discounting, many working capital solutions can be used in concert to maximize the effects of any individual strategy.

What This Means for SAPinsiders

Prioritize cash flow. Companies need to ensure they have maximized their liquidity to put themselves in better position to combat the effects of tariffs. Working capital solutions offer several different options to bolster liquidity and maximize profit margins.

Stay on the front foot. SAP organizations cannot afford to wait and see how tariffs will shake out. They must be proactive in finding ways to improve liquidity performance before they start to experience negative effects. Proactivity can put companies several steps ahead of the competition.

Extend your toolbelt so you can find the right tool. With so much uncertainty and volatility in the market, companies may not know which working capital solution makes sense for them. The right solution may even change. This is why it is so important for companies to work with experienced partners like Kyriba – they need a wide array of proven solutions that can help them to overcome any challenges that emerges.