As tariffs remain a prevalent aspect of global trade, many businesses are feeling the pressure of these additional costs. Whether it’s an import duty on raw materials or a tax on finished goods, the impact of tariffs is real. But how do businesses manage these hidden costs, and what tools can help them pass these fees on to customers efficiently? In this post, we’ll discuss the role of tariffs in pricing strategies and how Rockton Pricing Management (RPM) can streamline the process.
The Impact of Tariffs on Your Business
When businesses bring in goods from abroad—whether raw materials or finished products—they’re subject to tariffs based on the value of the goods. These costs typically hit the purchasing side of a business. For example, if you’re importing materials from China or elsewhere, the tariff is due when the goods arrive in your inventory. This raises a crucial question. How do you manage these additional fees once your goods are in stock and ready for sale?
While tariffs are initially felt on the purchasing side, they quickly move to the selling side of the equation. Businesses will likely want to pass these costs along to customers and they must determine how to incorporate tariffs into their pricing strategy.
Adding Tariffs to Your Selling Price
Managing tariffs manually is an extensive and exhausting process, which is why it is beneficial to have an automation system, such as Rockton Pricing Management, in place to handle these kinds of adjustments. In the world of pricing, cost-plus strategies involve businesses calculating the cost of goods, adding overhead, and then applying a markup. Similarly, businesses can incorporate tariffs into their pricing.
For example, if you’re importing fire extinguishers and a tariff applies to that product, RPM allows you to set a specific rule that applies the tariff to the fire extinguishers, either as a fixed amount or as a percentage of the sale price. With RPM’s flexibility, you can group products by category, customer type, or even geographical location, tailoring the tariff fees as needed.
Tariff Management & Seamless ERP Integration
Once the tariff is applied, it doesn’t just sit in your pricing system; it can also be booked into your general ledger and sent back to your ERP system. This means that not only can you track the tariff cost, but it can also be displayed on invoices for your customers. Customization options enable you to clearly demonstrate the portion of the price increase attributable to tariffs, ensuring transparency for your customers.
The benefit of this approach is clear: it allows businesses to pass on the added cost of tariffs without complex manual calculations or confusion for the end customer. And while tariffs may fluctuate, RPM provides flexibility to adjust the date the tariff takes effect, ensuring you’re always up to date with the latest regulations.
A Flexible, Date-Driven Approach to Tariffs
One of the most powerful features of RPM is its date-driven functionality. Tariffs can be set to apply on specific dates, and if there’s a last-minute change (like a shift in the tariff start date or a change in tax rates), it’s easy to update. For instance, if a tariff is set to take effect on April 2nd, but a policy change pushes the date back, you can quickly adjust the date within RPM, ensuring your pricing remains accurate. Likewise, if a tariff ends unexpectedly or is lifted after a set period, you can adjust your pricing accordingly. This enables businesses to respond in real time to changes in the tariff landscape.
Final Words
Tariff management can be complex, but with the right tools, businesses can effectively manage these costs. By integrating tariffs directly into your pricing strategy, tracking them through your ERP system, and passing them along to your customers transparently, you ensure these external costs don’t eat into your bottom line.
The next time a tariff hits, remember that it’s not just about the price you pay; it’s about how you pass those costs along in a way that’s fair to both your business and your customers. With RPM, you have the power to make the adjustment smooth, efficient, and seamless.
