Planning for the costs you can’t predict

• Economic disruptions can turn manageable costs into cash flow problems.
• Tariffs, fuel costs, supplier pricing, and changing tax obligations can create expenses that are difficult to predict or budget for.
• A strong business contingency plan accounts for several cash flow scenarios, not just the most likely one.
• Access to financing before a disruption can give finance teams more options when liquidity gets tight.

Even though you use your best judgment when forecasting, an annual budget can’t account for every economic outcome. You build a forecast, plan for known expenses, model revenue, and make decisions based on the best information available.

Then reality hits:

• Tariffs change
• Fuel costs jump
• A supplier raises prices
• A shipment gets delayed
• A surprise tax liability arises

These costs can be difficult to plan for because they don’t always fit neatly into an annual budget. And even when revenue is growing, cash flow can still tighten if expenses rise faster than cash comes in.

That tension has become particularly visible in 2026. The Federal Reserve’s 2026 Report on Employer Firms found that 77% of small businesses reported rising costs of goods, services, and/or wages or increased tariff-related costs as a financial challenge.

For businesses, the challenge isn’t predicting every economic change. It’s being prepared for what those changes could do to liquidity.

The cost of doing business can change faster than a forecast. Energy, transportation, materials, insurance, professional services, and supplier prices can all impact operating costs.

Fuel is a good example. Fuel tax volatility can affect more than transportation costs, extending to shipping, distribution, production, and supplier pricing.

The effect has been showing up in business costs. A 2026 CFO Survey from the Richmond and Atlanta Federal Reserve Banks and Duke University found that around two-thirds of firms reported higher unit costs following the recent increase in oil prices, while only one-third reported raising the prices they charge customers.

Tariffs create a similar challenge. New trade rules can affect businesses in several ways, making it harder to predict costs and plan cash flow. Thirty-nine percent of firms said tariffs or uncertainty around trade policy had affected their cost expectations.

Businesses may need to absorb higher import costs, raise prices, change suppliers, or purchase inventory earlier or in larger quantities.

Costs will increase, and there’s no stopping that. The variable you can control is giving your business liquidity and flexibility to respond accordingly.

Related: What you need to know about the US–Canada tariffs

Often, it comes down to timing.

Imagine a business expects to collect $500,000 from customers over the next 60 days. On paper, that may look like enough to cover upcoming expenses.

Then a supplier requires payment sooner. Shipping costs increase. A tariff raises the cost of imported inventory. A tax payment comes due.

The business may still have strong revenue and healthy long-term prospects. But the cash it expected to have available is suddenly tied up elsewhere.

That’s a cash flow gap.

Businesses are already feeling that pressure. The U.S. Chamber of Commerce found that just 16% of small businesses were very comfortable with their cash flow (down from 31% in Q3 2025). At the same time, 69% still rated their business as being in good health.

That distinction matters. A business can be fundamentally healthy and still experience short-term liquidity pressure.

Revenue growth and cash flow health aren’t always co-occurring.

When cash gets tight, the obvious responses can create problems of their own.

• Cutting inventory can preserve cash today, but it may also mean fewer products available to sell.
• Raising prices can protect margins, but customers may not accept the increase, particularly if competitors aren’t making similar changes.

And some expenses simply can’t be delayed:

• Payroll has to be met.
• Tax obligations have deadlines.
• Insurance premiums and rent still come due.
• Suppliers may have their own payment terms.

That leaves finance teams balancing competing priorities: protect liquidity without cutting so deeply that the business loses revenue or growth opportunities.

There isn’t always a perfect answer. That’s why contingency planning matters.

Business contingency planning is about knowing how your business will respond if a tariff, a fuel price spike, or a supply chain disruption occurs.

1. Start by building several cash flow scenarios rather than relying on a single forecast. Consider what happens if:

    

   • Key costs increase significantly.
   • Customers take longer to pay.
   • Seasonal sales come in below expectations.
   • A supplier changes its payment terms.
   • You need to purchase inventory earlier than planned.
   • An unexpected tax or tariff obligation affects your cash position.

2. Then identify which assumptions would have the biggest effect on liquidity. It also helps to establish a minimum liquidity threshold. This gives your team a clear signal that it’s time to act rather than waiting until the situation becomes urgent.

3. From there, rank your options and decide when you would use each one. Depending on the business, those options might include:

    

   • Delaying discretionary spending
   • Accelerating customer collections
   • Renegotiating supplier terms
   • Adjusting inventory purchases
   • Revising pricing
   • Drawing on available financing

The important part is making those decisions before you need them so that you can move forward with more confidence.

When a cash flow gap appears, urgency can limit your options.

For example, a business may have a tax payment due before several large customer invoices are collected. Financing can help address this timing gap.

Having access to a line of credit or other working capital before a disruption gives finance teams more options without immediately cutting inventory or delaying important spending.

The key is to establish access before the need becomes urgent.

Rest assured, no finance team can predict every change in the business cycle and the economy. The key is having financing available before you need it.

For eligible U.S.-based Avalara customers, Avalara Capital can provide access to working capital to help manage temporary cash flow gaps and tax obligations.

Learn more about how you can manage tax, compliance, and cash flow — all from the Avalara platform you already use and trust.