To uncover the reality, we surveyed 1,000 American consumers nationwide about how tariffs, prices, and product origins influence their decisions at checkout. The results reveal generational divides, surprising priorities, and a clear message for businesses and policymakers alike: most Americans want to support U.S.-made goods, but not at any cost.

Key takeaways

• If grocery prices jump due to tariffs, 88% of Americans say they’ll change how they shop, 1 in 3 will cut back, and another third will switch to cheaper brands.
• Despite claiming to care about product origin, 9 in 10 Americans don’t check where items are made before buying.
• 1 in 3 Americans expect companies to absorb tariff costs instead of raising prices on consumers.
• Less than 1 in 5 Americans support tariffs to create jobs if it means higher prices on essentials like groceries.
• Only 30% believe tariffs are really about creating American jobs, most say they’re political tools or just a way to raise revenue for the government.
• More than half of Americans (54%) are willing to pay up to 10% more for U.S.-made goods — but if prices get any higher, most walk away.
• 8 in 10 Americans say the U.S. needs to reduce reliance on other countries to protect its own economic security.
• 52% of Americans buy U.S.-made products to support American jobs, not out of patriotism.
• Only 1 in 4 Americans believe tariffs are an effective way to boost U.S. production and economic independence.
• 3 out of 5 Americans think tariffs will harm the economy in the grand scheme of things, causing higher prices and trade hostility.

How important is “Made in the USA”? Over half have bought American, but many won’t pay extra

68% of Americans say buying U.S.-made goods is key to supporting the economy, but younger generations aren’t sold.

Support peaks among baby boomers (78%), then drops steadily: 66% of Gen X, 60% of millennials, and just 54% of Gen Z consider it a priority.

But saying you support American-made and spending accordingly are two different things. When faced with a cheaper imported option, who still chooses Made-in-America products?

• Baby boomers: 81%;
• Gen X: 71%;
• Millennials: 73%;
• Gen Z: 62%.

Americans may support “Made in the USA,” but their wallets set the limit.

While 54% are willing to pay up to 10% more for domestic goods, only 17% would go beyond that. And for 1 in 3 shoppers, price is the only thing that matters; origin doesn’t even cross their mind.

Americans buy domestic to protect jobs, not wave flags

For one in two Americans, buying U.S.-made goods is about protecting jobs and supporting the country’s economy. Only a mere 4% do so in the name of patriotism.

At its core, the push to “Buy American” ultimately reflects deeper economic worries. 81% of Americans believe cutting reliance on foreign nations is essential to safeguarding the U.S. economy.

Tariffs 101: Familiar, but divisive

9 in 10 Americans may understand what tariffs are, but they certainly don’t agree on whether they’re a good thing.

1 in 2 Americans think tariffs are a bad idea, especially for consumers. 52% are concerned tariffs drive up prices, while only 1 in 3 see them as a way to boost economic independence.

Gen Z and the wealthy agree: tariffs are worth it

Despite not being as financially established as older generations who have had time to build up wealth and security, Gen Zers show the highest support for tariffs (36%). Baby boomers aren’t far behind, at 33%, while Gen X are the strongest opponents at 25%.

Higher earners tend to favor tariffs, while lower-income Americans are far more skeptical. 67% of those earning $150,000 or more say tariffs are beneficial and show no concern about rising prices.

But for those making less than $50,000 a year, support plummets to just 24%, reflecting the greater financial strain they face from tariff-driven price increases.

Groceries 20% more expensive at the checkout? 31% would switch, 25% want tariffs gone

A 20% price spike from tariffs would prompt nearly 9 in 10 Americans to change how they shop, and just 12% would accept the cost increase.

Generational responses show even sharper contrasts. 37% of baby boomers say they’d cut back overall spending, while younger Americans are more likely to adapt: 34% of Gen X and millennials would switch to cheaper products, along with 54% of Gen Z.

That said, baby boomers are the most likely to take political action; 29% would lobby for tariff removal. And despite having a reputation for being politically active and socially conscious, only 15% of Gen Z would do the same.

In response, companies dealing in necessities like clothing or groceries can diversify and track their inventory to ensure they have a variety of domestic and overseas products to give consumers more choices. 

Consumers want companies to eat the cost

After all, when tariffs hike prices, Americans don’t just adjust their behavior. They expect businesses to act, too.

If tariffs drive prices up by 30%, nearly half of Americans want companies to move manufacturing to the U.S. to avoid the added costs. One in three expect businesses to absorb the increase, while only 18% think those costs should be passed on to consumers.

Historically, companies typically either pass costs on to consumers or stop importing unprofitable products. And domestic manufacturing could pick up that slack, but that requires investing in infrastructure and increasing hiring to meet demand. For many small businesses, such investments simply aren’t feasible. Except for well-funded corporations, expecting companies to shoulder the burden of tariffs isn’t realistic. 

Ethics and environment: Nearly 3 in 4 Americans consider the broader impact of their purchases

Conscious consumption has captured the conscience of Americans, with 73% considering the ethical implications of their purchases.

Whenever they buy a low-priced foreign item, Americans think about its creation. Were workers paid fairly? Did they work in safe conditions? Did creating the product harm the environment? Did shipping it overseas?

Chances are, no, but that’s exactly what makes these products so affordable to American consumers and what allows corporations to make incredible profits.

If more manufacturing moves back to the U.S., products are going to be made more ethically — in safer environments, where workers are better paid and environmental regulations are stricter — but they’re also going to cost more, and it’s unclear whether Americans can afford to pay those prices.

Of course, caring is easy. Action is hard.

Just 15% of Americans actively seek out ethical products. So while 58% say ethics matter, convenience and cost still win out.

Will Americans keep buying if goods are sourced unethically?

Only 42% would stop buying a product if they found out it was produced unethically. Even though ethics may be important, they clash with price tags and convenience.

• 42% would stop buying the product.
• 29% would consider cheaper alternatives, but ultimately make a decision based on price. 
• 23% would delay a decision until they had more information.
• 7% would continue buying a product regardless of the ethical issues.

Ethical shopping divides generations. 50% of baby boomers would stop buying from an unethical brand, while just 25% of Gen Z say the same.

Nearly half of Gen Z (48%) would still choose the cheaper option, even if it came with ethical concerns. Despite being the most ethically aware generation, Gen Z is often limited by cost, highlighting a gap between values and action.

Americans may rationalize, and even accept, their purchases, but they don’t feel good about them. They’re nearly twice as likely to feel guilty about buying unethically sourced products (64%) as they are to feel no guilt at all (36%).

However, guilt isn’t enough to overcome the ever-rising costs of ethically produced goods. 

American bias

Only 40% of Americans think U.S.-made products are produced in ethical working conditions, despite having stronger labor laws and union protections.

• 40% of people express the belief that U.S.-made products are more likely to adhere to ethical standards and be produced in fair labor environments. 
• 35% remain unsure, suggesting their perception depends on the specific product or the company behind it.
• 25% hold the view that U.S. products are not necessarily more ethical than those produced elsewhere.

After all, ethical labor doesn’t always mean ethical impact, and concerns about environmental harm, pollution, and climate change may erode trust in domestically made goods.

Checking the label: More than 1 in 3 rarely or never look when shopping online

Ethical shopping often requires one thing most people don’t have: time. Features like one-click checkout make it easy to skip the research, and most Americans admit they don’t dig deep before hitting “Buy Now.”

• 9% of people always research the products they buy online. 
• 56% check product information, but not for every purchase. 
• 35% of people don’t do any research. 

The same dynamic is at play when it comes to checking where products are made:

For many, the “Made in the USA” label signals quality and trust but those assumptions are increasingly questioned. After all, products with this label may be designed in the U.S. but actually created elsewhere.

While official designations are regulated, many origin claims slip through loopholes, leaving consumers wary. Marketers know the power of patriotic branding and many aren’t afraid to blur the lines to boost appeal to the 68% of Americans who want to support the economy through their domestic purchases.

Most consumers are aware of this possibility: 

The result? A retail environment where values-driven shoppers must navigate not just price and convenience, but murky claims and mixed signals.

30% import premium? Over 40% say “No thanks,” even if it means American jobs

When American-made products come with a 30% higher price tag, 91% of consumers hesitate or outright refuse to buy them. 

• 47% say their decision depends on their finances at the time of purchase.
• 44% can’t justify such a high price increase. 
• 9% are willing to financially sacrifice for U.S. businesses.

For some, it may depend on what it is they’re buying. 46% of Americans wouldn’t support tariffs on necessities like groceries, even if it eventually led to more American jobs. For others (35%), it depends on how much prices rise. And only 19% support tariffs in the name of creating more American jobs.

Tariffs are supposed to level the playing field for domestic manufacturers in a market flooded with cheap imports. But many Americans wouldn’t be so quick to jump on the made-in-USA bandwagon, even with price hikes on foreign goods. 

The bottom line? It’s about the bottom line. Americans care about supporting U.S. jobs, but only so much. When costs surge, the reality of life pushes ideals to the wayside.

Tariffs on our neighbors: Nearly 60% blame the U.S. government for rising costs

3 of 5 believe tariffs ultimately do more harm than good for the economy, with only 25% believing they help. Stress, frustration, and uncertainty over these harmful effects are all fueling this fire:

Tariff anxiety cuts across generations and income brackets. However, Gen Z is especially concerned about this issue, with 64% citing it as their biggest worry, followed closely by 60% of baby boomers, compared to about 50% of Gen X and millennials.

This fear plagues even high-income families. 59% of Americans earning at least $150,000 fret over price hikes more than anything else — almost identical to the 56% of Americans bringing in less than $50,000.

If tariffs do cause price spikes, Americans are primed to point fingers, particularly at the government.

Ultimately, the government is incentivized to get positive results from tariffs or they risk facing the political backlash of financially strained consumers.

Why tariffs on Canada and Mexico?

Trade between the U.S., Mexico, and Canada has long been governed by sweeping agreements from NAFTA in 1994 to the more recent USMCA in 2020. But President Trump’s tariff threats and policies disrupted that foundation, leaving many Americans questioning what those taxes were really about.

And for many, it’s not about trade at all. Here’s what Americans believe the tariffs are really for:

• Punishment for immigration and drug trafficking: 31%;
• Creating more American jobs: 30%;
• Generating revenue for the government: 29%;
• Something else entirely: 27%;
• Protecting national security: 14%.

The wide range of beliefs reflects the volatile nature of the Trump-era tariff landscape, marked by shifting justifications, sudden rollbacks, and evolving rhetoric. But it also highlights something deeper: Americans aren’t sure who these tariffs help, or whether they help at all.

Yes, most Americans grasp the basic concept of tariffs. But few are willing to pay the price when it hits their bottom line and many remain skeptical that these taxes will meaningfully strengthen the U.S. economy.

For now, the takeaway is clear: While “America First” tariffs were designed to protect, they’ve left many consumers feeling uncertain, unconvinced, and stuck footing the bill.

Methodology

For this study, we took data from 1,000 American consumers. To get an accurate picture, we included people from different states, age groups, and income brackets. We analyzed the response data using these factors and others, including location (region of the country) and gender. 

Finally, our questions covered both general purchases and necessities like groceries. This approach helped us pinpoint any differences between spending on needs and non-necessary items. 

Fair use policy

Users are welcome to use the analyses and findings from this study for noncommercial purposes, such as academic research, educational presentations, and personal reference. However, when referencing or citing this article, please ensure proper attribution. Direct linking to this article is permissible and encouraged to provide readers with access to the primary source. 

For commercial use or publication purposes — including but not limited to media outlets, websites, and promotional materials — please contact the authors for permission and licensing details. We appreciate your respect for intellectual property rights and adherence to ethical citation practices. Thank you for your interest in our research.

The post Made in America: How Tariffs and Costs Influence Consumer Choices appeared first on inFlow Inventory.

• The US introduced a 10% tariff on all imports from April 5, 2025, including UK exports.
• UK economic growth is expected to slow, with sectors like automotive, steel, and pharmaceuticals most affected.
• SMBs trading with the US face tough decisions on pricing, as absorbing or passing on costs impacts competitiveness.
• Tariff rates are based on the product’s country of origin, determined by where substantial transformation occurs.
• Basic packaging or labelling in the UK does not qualify as transformation under US rules.
• Clear documentation is essential to prove origin and avoid delays, fines, or rejection at customs.
• Tariffs add pressure across supply chains, from supplier reliability to stock management and fulfilment.
• Smarter inventory planning and tools like inFlow can help businesses stay organised, resilient, and informed.

There’s been a lot of hullabaloo in the news recently about tariffs, and for good reason. On April 5, 2025, the United States rolled out a new ‘baseline’ tariff of 10% on all imports. Unfortunately, the UK wasn’t exempt from its far-reaching wrath, meaning all UK exports are subject to the new rule. The whole debacle has understandably left many worried about the impact of Trump’s tariffs on the British economy, stirring up questions about how best to mitigate their effects.

In this article, we’ll walk you through the essentials – from what tariffs are, how they might impact your business, and what practical steps you can take to stay ahead.

What is a tariff?

If we take this hotly debated topic and boil it down to its basics, a tariff is simply a tax on goods coming into a country. Governments may use tariffs in an attempt to protect local industries by making imported goods more expensive. The idea is to encourage people to buy local products instead of imported ones.

However, for businesses, tariffs mean higher costs, tighter margins, and possible changes in how and where you source, produce, or sell.

How will US tariffs impact the British economy?

While no one has a crystal ball (that we know of, at least), experts across the board paint a rather gloomy picture. It’s expected that tariffs will challenge our economic growth, undermine our sectoral stability, and threaten global trade dynamics. According to KPMG, British national GDP growth could decline between 0.8% and 1% for 2025 and 2026, down from earlier forecasts of 1.5%. 

The automotive, steel, and aluminium industries have been hardest hit, having received a considerably higher tariff of 25% on all UK exports to the United States. And while the pharmaceutical industry has managed to escape the icy grip of Trumpified tariffs, this industry is expected to be next in line. From a broader perspective, the main worry is that increased costs from US-imposed tariffs could lead to higher consumer prices and inflationary pressures here in the UK. 

How will US tariffs impact my small or medium business?

To understand how the tariffs may affect your business, you’ll need to take a close look at your supply chain. Firstly, consider how reliant you are on the US market. If part of your customer base lives in the United States, you’ll unfortunately have to pay higher taxes on those particular exports. 

In this case, it might be tempting to pass those extra costs onto your customers. On the face of it, this makes a lot of sense. Except by doing so, you risk losing out to competitors who choose to front the costs themselves. In essence, small and medium UK businesses face a tricky dilemma: absorb the extra costs and endure reduced margins, or pass the costs onto US customers and risk weakening the competitiveness of your product.  

Additionally, you’ll likely experience less demand among US customers due to higher prices and a weakening national economy. The US’s global 10% tariffs cause significant inflationary pressure, reduced consumer spending, and supply chain instability. For UK SMBs, this may result in reduced orders, cancelled contracts, and slower growth in what is often a key export market. 

Why your supply chain matters more than ever

This is where things get a bit technical, but also where you have some level of control. Tariffs are based on where a product is considered to have been made, or more specifically, where it undergoes substantial transformation. In plain terms, that means the point in your supply chain where your product becomes something new (i.e. something with a different name, function, or use).

For example, if your business imports components and assembles the final product in the UK, it’s likely to be classified as UK-origin and now subject to the 10% tariff. If you only add a label or packaging, the origin stays with the original country.

But origin isn’t just about the process, it’s also about proof. You’ll need to keep detailed documentation showing where the “transformation” occurred. That includes supplier declarations, manufacturing steps, cost breakdowns, and more. Without it, US customs could apply penalties, delays, or even refuse your goods at the border.

Keep in mind that different product types have different rules. Industries like automotive, textiles, and pharmaceuticals face stricter origin thresholds and higher documentation standards.

Where things get challenging for SMBs

For smaller businesses, this level of complexity can feel overwhelming. Many don’t have in-house logistics or trade compliance teams, which means adapting to these changes can be time-consuming, costly, and disruptive.

Plus, it’s not just about origin rules. The broader impact of tariffs can affect every part of your supply chain, from supplier reliability and lead times to how much inventory you carry and when you reorder stock. Not to mention, just because you may decide not to raise your prices doesn’t mean your suppliers won’t either. 

Smarter planning can ease the pressure

While you can’t control the tariffs themselves, you can control how you respond to them. One of the most effective ways to stay resilient is through smarter inventory planning. For starters, demand forecasting and stock optimisation can help you anticipate sales patterns and seasonal trends, so you never overstock – or worse, run out. Holding safety stock of high-risk items is also a good idea. It can keep your operations moving if shipments are delayed or disrupted due to tariff-related issues.

Tracking supplier performance is another key piece of the puzzle. When you know which suppliers are dependable and which tend to drop the ball, you can adjust early and avoid unpleasant surprises. Lastly, prioritising your inventory by investing more in high-margin or high-demand products ensures your resources are going where they’ll have the biggest impact. These practices don’t just reduce risk, they give you a clearer picture of your costs and help you make confident decisions, even when things get unpredictable.

A practical tool to support you

If you’re looking for help staying on top of all this, inventory management tools can lighten the load. For instance, software like inFlow allows you to track stock across your supply chain, monitor supplier performance, and generate the documentation you may need at customs – all in one place. Ultimately, inventory management software like inFlow helps by giving you the right information at the right time in a clear and simple way.

The bottom line

The newly imposed US tariffs are a challenge, but not an insurmountable one. With a bit of forward planning, the right systems in place, and a clear understanding of your supply chain, UK SMBs can reduce the tariff impact, stay agile, and uncover new opportunities even in turbulent times.

If you’re ready to get organised, a closer look at your inventory processes might be the best place to start.

The post The Impact of US Tariffs on UK Exports: A Guide for SMBs appeared first on inFlow Inventory.

• An invoice is a document or record between a buyer and vendor. An e-invoice and digital invoice are both electronic alternatives to traditional paper invoices. 
• E-invoices differ from digital invoices in that they follow a structured format and enable full automation. Digital invoices refer to any non-physical invoice regardless of the data format. 
• Many countries within the EU require businesses to provide e-invoices. 
• Some common data formats for e-invoices are XML, JSON, Peppol BIS, EDIFACT, and UBL. 
• The benefits of e-invoicing include faster payments, fewer errors, reduced costs, and better eligibility for government and enterprise contracts.
• inFlow supports digital invoicing and integrates with QuickBooks and Xero, making it easy to manage inventory while your accounting tools handle e-invoicing compliance.

Invoicing may not be the most glamorous part of doing business, but it plays a crucial role in keeping your day-to-day operations running smoothly. Thankfully, sending and receiving invoices has never been easier with the introduction of e-invoices. These digital documents speed up payments, reduce errors, and provide an abundance of other benefits that businesses of all sizes love.  

But in the many parts of the European Union (EU), e-invoicing isn’t just about adding convenience to your workflow—it’s about adhering to the law. Several EU countries have already implemented rules and guidelines for business surrounding e-invoices, and more countries are planning to follow suit. 

In today’s article, we’ll go over e-invoices and how they differ from traditional and digital invoices. We’ll also discuss their benefits, challenges, compliance requirements, and how to implement them.

What is an e-invoice?

An invoice is a document between a buyer and a seller that details all sorts of relevant information, such as the goods or services, how much they cost, the date of the transaction, and so on.

Following that logic, it only goes to reason that e-invoicing refers to sending, storing, and processing them digitally. Right? Not quite. See, in the business world, there’s actually a distinct difference between digital invoices and e-invoices. 

Generally, e-invoices are issued, sent, and received in a structured digital format and processed directly into an automated system. Notably, this process doesn’t require human intervention- it’s all handled by software.

On the other hand, “digital invoice” simply refers to any invoice that is not on paper. In other words, any invoice that’s digital. However, this doesn’t mean they’re part of an automated system. They could simply be images stored as PDFs and sent manually between individuals. 

In other words, every e-invoice is a digital invoice, but not every digital invoice is an e-invoice. It’s a small distinction but an important one nonetheless.

What benefits does e-invoicing bring?

There are quite a few benefits to implementing e-invoicing. Many of those have to do with the nature of storing invoices in a digital format. It’s easier to store, easier to manage and organize, and easier to search for relevant information. Not to mention, programs can pull data from e-invoices much faster to create financial reports. 

Another advantage of e-invoicing is that it standardizes data sharing across the supply chain, which means everything is faster and less susceptible to mistakes. This speeds up payment processing and cuts down on both cost and waste.

It’s also worth mentioning that some public sector entities and large corporations only accept e-invoices. This means they will likely reject any paper invoices you submit. Not having the capacity to deliver e-invoices will ultimately mean you won’t be able to bid on government contracts or work with large corporations. 

Aside from the many benefits e-invoicing brings, it’s also mandatory in some areas of the EU.

E-invoices are mandatory in parts of the EU

In April 2017, the EN 16931 standard was published by the European Committee for Standardization (CEN). While this standard first mandated using e-invoices for B2G (business to government) transactions, it differs from country to country. 

For example, Germany won’t have mandatory e-invoicing until January 2026. Finland, on the other hand, has required e-invoicing since April 2020. For a more detailed look at European legislation, check their website here. 

If you operate in the European Union- and especially across multiple countries- make sure to check their individual laws. What may be compliant in one might not be compliant for their neighbors. 

Where does e-invoicing fit into EDI?

E-invoices themselves are just one part of the electronic data interchange (EDI) landscape. It’s existed since the 1960’s and operates with a straightforward purpose. To make sharing information between businesses easier.

Think of the last image you took, opened, or saved on your phone. It could have been one of a few file types; such as JPEG or PDF. It might not appear any different to the human eye, but it has a different data structure behind the scenes. 

Now, imagine if your phone could only read one of those types. You’d be able to tell that it’s an image, but not be able to open it. 

While perhaps not a one-to-one comparison, it’s that exact issue that EDI and e-invoicing attempt to solve. Having an easy-to-use, accessible data format makes communications between businesses easier. It also makes internal processes more straightforward while cutting down on overhead costs. One of the goals of e-invoices is automation, after all. 

As for government entities, it makes collecting and processing financial data much more effortless. In the case of the EU, one reason e-invoicing is mandatory is because of the value-added tax (VAT). 

Common e-invoice formats

Not all e-invoices will use the same format. Different countries and regions may require specific formats for their e-invoices. Here are some of the most common ones.

XML 

XML stands for extensible markup language. It’s a flexible markup language used for storing, transmitting, and organizing data. Unlike other programming languages, XML has no computational capabilities. It encodes documents in a format that is both machine and human-readable. This format is very common for e-invoicing.

JSON 

JSON, or JavaScript Object Notation, is a text format for storing and exchanging data. Web applications frequently use it to transmit data between a server and node. Like XML, JSON is both human and machine-readable. It’s worth noting that JSON is generally simpler than XML and has seen increased popularity due to this fact.

Peppol BIS 

Peppol stands for Pan-European public procurement online. The BIS stands for business interoperability specifications. Peppol itself was initially used to improve public procurement across the EU. It later saw widespread adoption in the public sector as well. Peppol is based on XML. 

EDIFACT 

Electronic data interchange for administration, commerce, and transport. Developed by the UN Economic Commission for Europe (UNECE). E-invoices in Europe, as well as parts of Asia use this format. 

UBL 

Developed by an OASIS technical committee. There are no royalty fees associated with using the data structure. UBL, or universal business language is designed to plug and play into existing businesses. Like other structures, it’s designed to improve information exchange by streamlining the process.

The future of e-invoices 

And, as with any technology, e-invoicing continues to improve- especially in relation to other technologies. Some notable changes include:

• Blockchain— One particular technology of interest is blockchains. While the term may conjure impressions of various cryptocurrencies, blockchains are something different. We won’t go in-depth here, but you can consider them a security measure. Because every computer functions as a node, they’re functionally impossible to hack. 
• AI— And of course, AI is another technology to keep an eye on. It’s already gone to work in e-invoicing, most notably increasing accuracy while also offering a greater degree of automation.
• Smart contracts—These new types of contracts can automate the entire invoice-to-payment process. They are designed to automatically carry out the terms of a contract once certain conditions are met. This completely eliminates the need for intermediaries.  

A step-by-step guide to implementing e-invoices 

We’re not going to sugarcoat it. If you want to start e-invoicing, there will be some initial challenges, but the value they add is well worth it. Here’s how you can make the transition.

1. First, you’ll need to assess your current workflow and map out how your business handles invoices. Then, identify and make note of any bottlenecks and compliance gaps.
2. To ensure you stay compliant with your region’s regulations, look up the e-invoicing requirements for your country or industry. This will determine your technical and legal needs.
3. Next, you’ll need to find software that supports structured e-invoices, integrates with your existing systems, and complies with local mandates (ex. Peppol-ready, EN 16931-compliant).
4. Once you set everything up, try rolling it out with just a few clients or vendors to test the system. This should allow you to iron out any issues in a low-risk environment. 
5. Now that your new system has been tested and is ready to launch, it’s time to train your team. Proper onboarding and documentation will go a long way to help your finance and operations staff down the road.
6. Just because you’ve set up your e-invoices doesn’t mean the work is over. Make sure that you monitor and track key metrics, such as invoice approval time, payment delays, and errors. This data will not only allow you to measure the success of your new workflow but also empower you to make any adjustments if necessary.

How inFlow can help with invoicing?

While inFlow doesn’t offer e-invoicing in the strict regulatory sense like software connected to Peppol or national tax systems, we do offer businesses digital invoicing features. Our inventory management system can create professional invoices quick and easy and send them directly to customers via email with a complete audit trail! You can also track payment status and get alerts on overdue invoices. 

And even though we don’t support e-invoices natively, our customers can use our integrations for both Xero and QuickBooks Online to handle all their e-invoicing needs. So, you can let inFlow handle all your inventory and order management needs while your accounting software takes care of the books. 

The post Overcoming E-Invoicing Challenges: Tips for SMBs in the EU appeared first on inFlow Inventory.

• Construction cost codes are an organizational method to categorize and track project expenses, providing greater financial insight. 
• They are expressed in alphanumeric tags that indicate project information, such as material and labor type needed. 
• These codes help businesses create accurate estimates, simplify invoicing, analyze past performance, and improve team collaboration. 
• The Construction Specification Institute (CSI)’s MasterFormat is an internationally used cost code format. 
• Uniformat is also used in the US and Canada, but operates in different systems than MasterFormat.
• These pre-existing cost code systems provide a consistent framework for classifying tasks and elements. 
• Companies can create their own construction cost codes that are lacking from existing systems based on past projects. 

Coming in on budget is one of the biggest challenges in the construction and field service industries. When you’re managing labor, equipment, subcontractors, and ever-fluctuating material costs, it’s easy for things to spiral out of control. It’s no wonder these industries are known for their brutal overhead costs- and the razor-thin margins that follow. 

For this reason, construction businesses make a point of really nailing down their costs. And they use a lot of tools to do this- one of them being construction cost codes. 

While you may be familiar with other common business tools like barcodes and field management software, construction cost codes are a more specialized tool, meaning they’re not as well-known. 

So, what are cost codes for construction? How do they help businesses retain accounting and budgeting accuracy? There’s a lot to go over today, so let’s get right into it!

What are construction cost codes?

A construction cost code is an alphanumeric string companies use to categorize project expenses. You can think of them as labels or tags that help break down a project’s budget into manageable pieces. Each construction cost code represents a task, material, or phase of work—for example, excavation, plumbing, HVAC installation, drywall, etc.

To help illustrate, let’s make up a construction cost code of our own. We’ll use ‘3L-EL’. In this example, 3L stands for “three levels,” and EL indicates the job requires an electrician. That’s all there really is to a construction cost code. It distills information into a shorter format. 

And, like we said, this is just an example to illustrate their simplicity. There are official, widely used construction codes. We’ll get to those below.

What are the benefits of cost codes for construction?

Construction cost codes enable precise tracking of project expenses and costs. They help avoid overlaps in material acquisition and layout requirements in a format that’s easy to understand. At the same time, they make it easier to estimate construction costs.

A less tangible benefit is that it makes communication much more manageable. 

Construction cost codes take information and simplify it. That reduces the error rate in orders and requests. It also makes it easier to process and store. Rather than documents with long, complicated jargon, businesses can get all the information they need at a glance. 

Homegrown cost codes can also ease administrative and budgeting concerns. For example, let’s say you own a construction company specializing in outdoor home add-ons—things like garages, sheds, and so on. 

Between deciding on materials, ordering them, and so on, the construction information passes through quite a few layers. Requests must be made and approved, shipping organized, etc. 

Additionally, construction and field service work will often require different specialized jobs, like hooking up water or electricity, and so on. Having an easy way to denote project requirements and compress information into a smaller format makes communication easier.

What are the industry standard construction cost codes?

Of course, with things like this, developing and adhering to a wide-reaching standard is often beneficial. So it’s no surprise that a couple exist here. Many contractors use these pre-established cost code systems to ensure consistency across projects. 

CSI MasterFormat

The MasterFormat, developed by the Construction Specifications Institute (CSI), is an internationally recognized information standard. These CSI codes, as they’re known, are considered the gold standard for communicating and classifying construction specifications. 

The CSI MasterFormat organizes work into 50 divisions (ex. Division 03: Concrete and Division 26: Electrical). Under each division, there are sections for specific tasks that add detail. An example using the codes mentioned above would be:

• 03 30 00 – Cast-in-Place Concrete
• 26 05 19 – Low-Voltage Electrical Power Conductors

The MasterFormat works exceptionally well for large-scale projects with many different teams collaborating because of the consistency in documentation, estimates, and cost tracking. 

Uniformat

Another commonly used cost code for construction is Uniformat, which is mainly used in the US and Canada. However, it’s important to note that contractors use these codes in different ecosystems. They don’t compete with one another.

While MasterFormat classifies by trade and raw materials, Uniformat classifies by building systems or functional elements like substructures, shells, interiors, etc. (ex. A10: Foundations & B20: Exterior Enclosure). 

Contractors use the Uniformat in the early stages of development to assist with conceptual estimates and coordinating work around building elements rather than trades.

Why are Uniformat and CSI codes so widely used?

There are a lot of vendors in the construction industry, and they all exist for a reason. They have different specialties, different certifications, and so on. They also work with one another frequently. 

Imagine if all those vendors used a different categorization method for their construction cost codes. That would make communication between them nothing short of a nightmare. That’s the main reason that these widespread standards exist. They result in a communication standard that everyone understands. 

However, that doesn’t mean you can’t benefit from developing your own custom construction cost codes. Every business has unique needs, and as a result, it may find it helpful to create one or two of its own.

How do construction cost codes improve budgeting?

One of the most essential things cost codes bring to the table is their ability to improve budgeting. By assigning every cost a specific code, companies can:

• Track actual costs in real-time
• Compare estimates vs actuals
• Simplify invoicing
• Generate detailed reports

When you assign each cost a code, you can hyper-focus on each expense independently. For instance, you may look at code 03-100: Plumbing Rough-In and notice that the labor exceeds the budget. Once you have this information, you can determine whether this is due to longer hours, higher rates, or scheduling delays. Without cost codes, that level of insight would be challenging and time-consuming to achieve.

How to develop your own construction cost codes

Creating your own construction cost code will ultimately depend on your needs. It’ll vary a lot from business to business, so rather than give you all the specifics, we’ll discuss the broad strokes that should largely remain the same. 

Assess your needs

If you plan to create your own cost codes from scratch, chances are you have more niche things that need tracking. Otherwise, sticking with the pre-existing cost code formats would be wise. You can get a better idea of which codes you need by looking at past projects. What were some of the most common tasks, phases, trades, or materials? Did any of these things lack existing cost codes? If so, they would make suitable candidates for a new cost code.

Establish your code’s structure

You can use the CSI code format as a foundation when building out your new codes. Next, you’ll need to decide what your construction code consists of. This means how many segments it will have, what information each segment will contain, and so on. Make sure to strike the right balance. Too little information defeats the purpose, and too much information can bog down the employees who work with them. 

Document your code library

Once you have your codes, it’s important to document them somewhere all employees can reference them quickly. This library should include a complete breakdown of each code to ensure there is no confusion. An example entry might be:

Code: 1300

Description: Site Grading

Includes: Equipment rental, labor, materials

Integrate cost codes into existing systems

Once you’ve set up your codes, it’s time to put them to use. Remember: construction cost codes are a tool for organizing financial operations. They should make things easier.

Using cost codes in tandem with field management software like inFlow means you’ll always know what materials you have on hand- and where to allocate them. Additionally, you can create custom fields to tag and organize items or expenses according to specific construction cost codes. 

Train employees and maintain your code system

Lastly, be sure to maintain your construction cost code system. That means changing things that don’t work and revising the system as new things happen. You’ll want to conduct regular reviews to ensure efficiency, train employees accordingly, and add new technology wherever possible. It’s part of keeping up with the competition. 

Final thoughts

Construction cost codes are an invaluable accounting tool that aims to give you more financial clarity. By using standardized systems like Uniformat and CSI codes and tailoring them to your specific needs, you can stay organized, maintain budgets, and make better business decisions.

The post Construction Cost Codes Explained: What They Are and Why They Matter appeared first on inFlow Inventory.

• Job order costing is an accounting methodology manufacturers use to evaluate the exact cost of each custom order, including materials, labor, and overhead.
• This accounting methodology works best for businesses that deal with unique and custom products. 
• Job order costing differs from process costing, which spreads costs over large batches.
• Manufacturers who use a job order costing system have better cost control, budgeting, and pricing accuracy, which allows them to determine profitability and adjust pricing strategies.
• Proper implementation requires detailed tracking of direct materials, labor, and overhead expenses to ensure accurate cost calculations.
• Some common challenges include complex record-keeping, fluctuating costs, and the need for precise tracking.
• Companies that adopt manufacturing software are more likely to succeed with a job order costing system. 

Calculating costs for any manufacturing business requires meticulous tracking. There’s labor, raw materials, utilities, shipping; the list goes on. However, for manufacturers that deal with custom or unique orders, cost tracking can be ten times more challenging.

With custom products, different orders incur different costs, and that makes accounting for production costs difficult. And that’s not great for any business. One accounting method that these businesses use to make things more manageable is job order costing. 

Today, we will discuss job order costing in detail, including its definition, whether it’s right for you, and how to implement it in your manufacturing or assembly business. 

What is job order costing?

Job order costing, or job order cost accounting, is an accounting method that calculates the exact rate of each product assembled. As mentioned above, it’s especially useful for businesses that produce custom products or small batch production runs. 

This is distinctly different from process costing, which averages costs over large batches of identical products. Job order costing makes tracking direct labor and overhead expenses easier for individual projects, offering more precise cost control and pricing accuracy.

What are the benefits of job order costing?

Think of all the mass-produced products you see on retailers’ shelves. On a microscopic level, there might be slight differences, but they’re generally identical. These products are an example of process costing, which offers tremendous advantages to manufacturers. Perhaps most notably, it makes calculating total manufacturing costs simple.

That’s not the case for manufacturers who take custom orders. It’s reasonable to say that each of their orders will be different in some way. That means each will cost a different amount to produce. Here are some of the most notable strategic advantages job order costing offers businesses:

• Cost control and budgeting—By tracking each product’s costs in detail, you can control expenses and quickly identify inefficiencies, making it easier to determine pricing strategies.
• Profitability analysis —Job order costing allows manufacturers to determine the profitability of each order. From there, you can adjust pricing or resource allocation accordingly.
• Pricing accuracy—When you know exactly how much each product costs to manufacture, you can set prices that reflect the actual value and ensure sustainable margins.
• Customization efficiency—For businesses that handle assemble-to-order (ATO) or made-to-order manufacturing, job order costing is invaluable in accurately estimating costs and delivery timelines.

Components of a job order costing system

Job order costing aims to track three main components to accurately calculate each product’s cost. Those components are:

1. Direct materials

Direct materials are the raw materials used to create finished products. With a job order costing system, materials are allocated specifically to each production run. This method makes proper inventory tracking essential.

2. Direct labor 

Like direct materials, labor is also assigned on a per-production-run basis. This method is much more manageable since production cycles tend to be much smaller in scale with job order costing. Still, it’s a good idea to log labor hours to understand the labor needed to manufacture each product accurately.

3. Overhead costs

Overhead costs include rent, utilities, insurance, and any other operational costs. To get an accurate understanding of costing, you’ll need to add up all of these expenses and determine a predetermined overhead rate to apply to your products.     

How do you start job order costing?

Job order costing systems involve meticulously tracking everything and remaining agile enough to pivot at a moment’s notice. Here are four steps to start:

• Step#1: Define the project—Odd as it sounds, defining the project is an important step that some overlook. Because orders differ, it’s essential to treat each one as a separate project. That means defining the scope of the project and starting anew whenever necessary.
• Step #2: List and track direct materials—Manufacturers rely on a supply of materials to do their jobs. They need to purchase those materials, which invariably incur a cost. Figuring out what materials you’ll need beforehand—and keeping careful track during the process—is crucial for job order costing. 
• Step #3: Calculate labor costs—Labor is another cost to consider. Employees work for wages, after all. All things considered, calculating labor costs is fairly simple, especially if your employees work for an hourly wage. However, keep in mind that some projects may require multiple skill sets. That often means a difference in wages. It’s important to factor in the different values.
• Step #4: Factor in overhead—It’s essential to establish a consistent method to distribute your overhead costs evenly throughout each of your products. This may mean figuring out how much your overhead costs per hour of production. 

Common challenges

Useful as job order costing is, it has its challenges. Here are some of the most common ones. 

Requires complex, in-depth records 

Sometimes, storing and displaying information in a cohesive, legible fashion can be complicated. Job order costing requires meticulous records to reach an accurate figure, and keeping and maintaining these records can prove difficult.

Cost fluctuations 

Unfortunately, nothing stays the same price. It might go up or down, but either way, it’s changing. That means the cost changes with it. This can be due to seasonal demand or something else. 

For example, the COVID-19 pandemic and subsequent lockdown had a major impact affected global markets. It completely broke some while propelling others to new heights. For example, the video game industry saw a 63% annual increase in some areas.

Requires accurate tracking

In addition to requiring meticulous records, job order costing also needs accurate tracking. Not accounting for materials or labor hours throws all the calculations off. While tricky, there’s also some good news here. Manufacturing software can take care of the tracking while also helping out on the reporting side. 

Choose what’s best for your manufacturing business

Every manufacturing and assembly business is different. Each has its own specific needs that hinge on the type of products they produce. The trick is to find out what works best for your specific situation. So, don’t be afraid to try something new and test what works best.  

If you’re looking to integrate job order costing into your business, start by exploring inFlow Manufacturing and discover how it can help you track inputs and outputs with ease.

The post A Manufacturer’s Guide to Job Order Costing and Why It Matters appeared first on inFlow Inventory.

• Proper inventory accounting involves tracking all materials, including raw materials, work-in-progress, and finished goods. 
• Inventory accounting aims to ensure that all financial records are accurate and up to date. 
• Which inventory costing method you choose will have a major impact on your inventory accounting.
• The three most popular inventory costing methods are first-in-first-out (FIFO), last-in-last-out (LIFO), and moving average. 
• Another key metric involved with inventory accounting is cost of goods sold (COGS).
• COGS helps businesses determine the direct costs associated with producing or purchasing the goods they sell.
• Some inventory accounting best practices include cycle counts, adopting inventory software, and standardizing processes.   

Accounting for your inventory can be tricky! You have to be sure to include your raw materials, work in progress, as well as the finished goods that you have on site. Your inventory is considered a business asset, so whoever does your accounting will need accurate valuations to avoid issues on your balance sheet.

Today, we’ll focus on everything related to inventory accounting, including costing methods, cost of goods sold (COGS), and more. So, let’s put on our bookkeeping hats and get started! 

What is inventory accounting?

Simply put, inventory accounting is the process of tracking, managing, and adding value to your inventory to ensure accurate financial records. For proper inventory accounting, you’ll need to consider things like costing methods and COGS. These metrics are pivotal for your accountant when calculating numbers like the markup on your products.

Your inventory also directly correlates to your income earned (and therefore income tax) since you document the inventory you sell as an expense. Effective inventory accounting helps businesses:

• Maintain accurate financial records.
• Calculate taxes.
• Determine profit margins.
• Avoid stockouts or excess inventory.
• Make informed procurement decisions.

How do inventory costing methods impact accounting? 

Which inventory costing method you choose will significantly impact your financial statements and tax obligations. Businesses can choose from several inventory costing methods, the most common being first-in-first-out (FIFO). Other methods include last-in-first-out (LIFO), weighted average cost, and the specific identification method. Let’s take a closer look at each and how they will impact your inventory accounting.

First-in-first-out (FIFO)

The FIFO method assumes you always sell the oldest items in your inventory first. Essentially, you sell your products in the order you procure them, hence the name first-in-first-out. Most companies use FIFO for their inventory accounting, which usually offers lower COGS and higher profits. However, this costing method also may increase tax liabilities.

Example: Let’s say we own a furniture store and buy 25 office chairs for $25 each. A month later, we purchased 25 more office chairs, but this time for $30 each. We then receive an order for 30 office chairs for $1800. Using the FIFO inventory costing method, we would first use the 25 office chairs worth $25 each, and the remaining 5 chairs would come from the shipment that cost $30 each. This would bring the total cost of the chairs to $775, with a profit margin of $1025.   

Last-in-last-out (LIFO)

With the name last-in-first-out, I’m sure you may be able to guess how LIFO works. In the LIFO method, you assume that the items bought last are the ones that are sold first. This inventory costing method doesn’t typically follow the natural flow of inventory but can be advantageous in times of inflation, as it leads to higher COGS and lower taxable income. 

Example: To return to the example above, let’s say our business uses LIFO instead of FIFO. In that case, we would first take the 25 chairs from the $30 shipment and then the last 5 from the $25 shipment. This would bring the total cost of the chairs to $875, with a profit margin of $925. 

It’s important to note that the International Financial Reporting Standards (IFRS) has banned this costing method. 

Moving average costing

Moving average costing recalculates the average cost of each inventory item in stock after every purchase. The calculation takes the total cost of the purchased items divided by the number of items in stock. This costing method is effective at smoothing out price fluctuations and providing a balanced approach to inventory valuation.

Example: Using the above example, let’s examine how moving average costing impacts inventory accounting. First, we would divide the total cost for both shipments by the number of chairs purchased. This would give us a moving average of $27.50, meaning the total cost of the chairs is $825, with a profit margin of $975.

Specific identification method

This method keeps the cost of each and every item you have in your inventory. It’s typically only used for very high-cost and unique items such as cars or rare diamonds.

Example: Let’s say our furniture store also sells rare hand-crafted mahogany tables. Over a few months, we purchased 6 tables at various prices. For the first table, we paid $1000, then $1100, then $1200, and so on. We then sold 3 of those tables for $5000, to which we gave them the first 3 tables we purchased. Thus, the total cost of the tables is $3300, with a profit margin of $1700.

Why COGS is important to inventory accounting

Your cost of goods sold (COGS) is basically the cost of the items you sold over a time period. It affects taxation as businesses can deduct their COGS from revenue to lower their taxable income. Cost of goods sold also helps businesses evaluate their overall profitability and pricing strategies. The formula for COGS looks like this:

Breaking the formula down piece by piece, here’s what we get:

• Starting inventory—This represents the value of inventory a business has at the start of an accounting period, including any unsold items carried over from the previous period. 
•  Purchases—This represents the total cost of all inventory items during the accounting period. It may include expenses related to acquiring the inventory, such as shipping, taxes, and handling fees.
• Ending inventory—This represents the value of any unsold inventory during the accounting period.

Example: To return to our furniture store example, let’s examine the cost of goods sold for the office chairs we mentioned. We started our accounting period with 50 office chairs, with a total cost of $1375. We spent $300 on shipping and other fees related to that inventory. After the accounting period, we sold 30 of our 50 office chairs. For this example, let’s assume we’re using the moving average costing method, which means the chairs cost $27.50 each. Therefore, our COGS would be:

($1375 + $300) – $550 = $1125 

As the above example shows, the inventory costing method you choose will impact your COGS and, ultimately, your inventory accounting. 

Inventory accounting best practices

Everything mentioned above are just some of the many things you’ll need to consider when accounting for inventory. We get it. It can be pretty overwhelming, but we have some tips and tricks to help you keep your head above water:

1. Use inventory management software—You don’t use spreadsheets or a pen and paper when managing your inventory for the same reason you don’t use an abacus for arithmetic. Software solutions like inFlow have features that make inventory accounting a breeze.
2. Perform regular audits—Cycle counts are a pain. They’re time-consuming and sometimes require you to pause your business operations completely. However, we can’t stress enough how vital they are for accurate inventory accounting.
3. Monitor stock levels—When you order excess inventory, you will run into all kinds of complications when it comes to your accounting. Monitoring your stock levels as closely as possible can help prevent this. 
4. Standardize procedures—Standardization is valuable in all aspects of business, including inventory accounting. Establish clear policies for accounting, inventory tracking, purchasing, and valuation.
5. Leverage reports—If you’re using inventory software, chances are you’ll have loads of reports you can generate with just a few clicks. Take advantage of them!

Simplify your inventory accounting with inFlow

Accounting for inventory doesn’t have to be a headache. Like anything else in the modern day, you can always leverage software to make your life easier. Our software inFlow is perfect for anyone looking to automate their inventory accounting. For example, you can choose from a number of different costing methods for your products, such as LIFO, FIFO, and moving average. From there, inFlow can automatically calculate your COGS—no need for a formula. 

inFlow also integrates seamlessly with QuickBooks Online and Xero, offering a two-way payment sync option. This makes it easy to synchronize inventory data with accounting records and ensures that financial statements remain accurate.

Additionally, inFlow offers robust reporting features that will give you insights into your cost of goods sold (COGS), inventory movements, and profitability.

By leveraging inFlow, your business will gain comprehensive inventory and accounting features that you can use to improve your financial health.

The post How to Optimize Your Inventory Accounting and Boost Profits appeared first on inFlow Inventory.

• A tariff is a tax imposed by a government on goods imported into their country. Understanding how tariffs work is essential for comprehending international trade policies.
• The purpose of tariffs is to stimulate the local economy by encouraging consumers to buy locally. 
• While tariffs are imposed on businesses, the additional costs associated with them are typically passed down to the consumer through price hikes, making all imported goods more expensive. 
• The Trump Administration intends to place a 25% tariff on goods imported from Mexico and Canada and a lower 10% tariff on energy resources.  
• Supply chains will likely see substantial changes when the tariffs go into effect. 
• To mitigate the impacts of tariffs, companies should consider stockpiling inventory, reassessing supply chains, and exploring ways to reduce operating costs.  

Politics is a tricky subject and one we tend to avoid around here. But regardless of your political beliefs, Donald Trump, the new President of the United States, has taken office and plans to shake things up worldwide for businesses. In fact, he’s already gone to work, levying a 25% tariff on all trade from Mexico and Canada, with a lower 10% tariff on energy resources. This announcement has many businesses worried.  

This tariff was initially planned to take effect at the beginning of February but was postponed, giving time for more negotiations. But as of March 4, they have officially begun. With the Trump Trade War kicking off, businesses in North America are scrambling to determine what this means for their operations’ future.

Today, we’ll go over how tariffs work, who pays tariffs, and what they mean for your business. So, if you’re looking to protect your business from the possibility of tariffs in the future, you’ve come to the right place.

What is a tariff?

A tariff is a tax imposed by a government on imported goods and services. Some tariffs are ad valorem (a percentage of the product’s value), while others are specific (a fixed fee per unit). Governments often impose these taxes on particular imports. For example, President Trump recently announced a 25% tariff on all steel and aluminum imports coming into the US. This means any country that sells steel or aluminum to the US will be subject to this 25% tax.

In addition, tariffs can stack. For instance, the steel tariff would be on top of the 25% tariff announced on all goods from Canada and Mexico. This would mean that steel and aluminum imported to the US from either Canada or Mexico would be subject to a 50% tax. 

How do tariffs work?

As mentioned above, tariffs are taxes on products imported from other countries. If your business operates in Canada and sends products to customers in the US, you would be subject to these trade tariffs. The revenue from these tariffs would go directly to the government to help fund infrastructure, military spending, etc.  

Tariffs are usually valorem, a percentage of a product’s value, such as 25%. However, certain products may have a specific tariff (fixed price). Sometimes, a government implements exceptions to help protect certain businesses. For example, a tariff may have a loophole that excludes orders under a specific dollar amount.

What is the goal of a tariff?

Governments typically use tariffs to protect domestic industries by making foreign products more expensive. The idea behind this is that, in theory, tariffs encourage industries to purchase and manufacture products locally.

However, according to the White House, these new tariffs on Canada and Mexico are related to border security, particularly stopping the flow of illegal immigrants and fentanyl. It’s worth mentioning that many politically savvy individuals aren’t buying this reasoning. Instead, they believe the President is merely using this as an excuse to declare a state of emergency. A national security threat allows the sitting president to impose tariffs without direct congressional approval. 

Trump has also called for Canada to become the 51st state to avoid these proposed tariffs, making these tariffs a form of economic warfare.   

Who pays for tariffs?

It’s a common misconception that businesses pay for tariffs. While this is technically true, the reality is a bit different. Businesses operate with razor-thin margins, and every expense is accounted for when pricing their products. Therefore, the cost of tariffs is passed onto the consumer through price increases. This essentially means all goods from foreign countries will increase in price equivalent to the value of the tariff.

So, for instance, if you live in the US and purchase a product from Canada that was once $1000, you’ll now be paying $1250. Depending on a business’s gross profit margin, it may be possible to absorb some of these expenses but not all.

On the surface, a price increase may seem good for businesses. After all, it means more revenue. However, they will undoubtedly experience a decrease in sales as their customers look for locally sourced alternatives.  

In short, everyone pays for tariffs in one way or another. That’s just how tariffs work. 

Do tariffs work?

The short answer is no, not really. We know this because this is not the first time the United States has done this to its closest trading ally. In the late 19th century, the McKinley Administration made a similar push to make Canada part of the U.S. Their weapon of choice? A tariff. 

However, the result was far from what they desired. Rather than weakening Canada to the point of annexation, the tariff pushed them to do more business with Britain. The effects have persisted long into the modern day, considering Britain is the United States’ main economic rival. 

Another unforeseen effect was that many US manufacturers moved to Canada to avoid the tariffs altogether. 

At the time, Canadian Minister of Trade and Commerce Mackenzie Bowell said, “Our neighbors are cutting off their noses to spite us.”

What other effects will tariffs have on businesses?

There’s no two ways about it: tariffs make things more complicated for businesses. Here are some effects that you’re likely to see.

Increased operating costs and prices

The increased costs caused by tariffs have a ripple effect throughout every industry. This is because tariffs affect not only the products themselves but also the raw materials. We mentioned that Trump plans to impose a 25% tariff on imported steel and aluminum. Both metals are crucial to the construction and manufacturing industries. So, even if a company manufactures its products in the US, it will likely source some of its materials from Canada or Mexico.

Check out this clip from our latest podcast episode, where we discuss tariffs and their impact on small businesses.

Supply chain disruptions 

In the best of times, supply chains can run precariously, so it shouldn’t be surprising that tariffs threaten to break them. Previously robust supply lines may dry up, and many others may become completely unavailable. 

Retaliation 

Retaliation in this context means governments implementing retaliatory tariffs or legislation to get back at one another. A tit for tat, so to speak. Geopolitics can be messy; unfortunately, businesses get caught in the middle. When one government issues a tariff, other governments must respond in one way or another.

Reduction of imports 

If importing goods to the US becomes less profitable, fewer companies will do it. That’s another basic tenant of business. If a business can make $2 selling in the US or $3 selling in Europe, they’re going to sell in Europe. 

How can you prepare for tariffs?

Unfortunately, mitigating the effects of tariffs can prove challenging. Knowing how tariffs work doesn’t mean you can avoid them. It’s a federal-level mandate, after all. Still, there are some steps you can take to prepare. Here are some that we think you should consider:

• Stockpile ahead of time—Under normal circumstances, we wouldn’t advocate carrying excess inventory. However, desperate times call for desperate measures. Ordering as much as possible before tariffs take effect may be a smart move—at least for the short term. 
• Assess supply lines—The upcoming tariffs will likely challenge supply lines worldwide, so it’s a good idea to check up on yours. Some may rely on US or Canadian infrastructure, and whether that will remain after the tariffs is a bit of a toss-up.
• Explore alternative sources—As the costs of certain vendors rise, it’s essential to check for alternatives. While some suppliers may increase their prices, others may stop servicing your area altogether.
• Reduce costs in other areas—A great way to mitigate the impact of tariffs is to cut costs wherever possible. One easy way to do this is to use software to streamline your processes. For example, if you implement inventory software, like inFlow, you can automate various tasks, saving time and money.    

Conclusion

Now you know how tariffs work, you would probably agree that they aren’t great for anyone. If this trade war continues too long, consumers and businesses will feel the pain. We’re not trying to be the bringers of doom and gloom, but tariffs damage the global economy. That’s just the reality.

The post Why Tariffs Are a Disaster for Businesses in the U.S. and Canada appeared first on inFlow Inventory.

• VAT (Value-Added Tax) is a consumption tax applied at each stage of the supply chain, where value is added to a product or service. 
• A VAT number is a unique identifier required for businesses in countries with VAT systems. These numbers enable businesses to charge, collect, and reclaim VAT.
• Businesses operating in VAT-collecting countries may need to register based on turnover thresholds, imports, or the type of goods/services offered, including digital products.
• Unlike a sales tax, businesses collect VAT at every stage of production and allow them to reclaim VAT on purchases.
• Not only does a VAT number ensure your business is compliant, but it also enhances your credibility. VAT numbers also make it possible for businesses to reclaim VATs paid, which will reduce their tax burden.
• Over 170 countries, including the EU, Canada, and Australia, use VAT systems with varying rates and regulations.
• The average VAT rate is 21.6%. Some countries apply rates as high as 25% and others as low as 5%. 

Most businesses operate with a central goal: to make money. But growing revenue isn’t easy, especially when you’re confined to a specific region. After all, you can only convert so many people locally before your sales eventually reach a plateau. A common way to overcome this hurdle is by expanding your operations across international borders.

While international business can be a powerful way to boost your reach and revenue, it comes with a slew of complications to consider. One significant aspect is compliance with international tax laws, including obtaining a VAT (Value-Added Tax) number. So, what is a VAT number? Why might your business need one? And how does it differ from other tax identification numbers?

What is a VAT number?

If you’re a business, particularly in the EU, looking to sell your goods across borders, you’ll need to know what a VAT ID is. A value-added tax identification (VAT) is an identifier businesses use for tax purposes in countries that collect Value-Added Tax. It allows businesses to charge, collect, and remit VATs to the relevant tax authorities.

VAT numbers are commonly required in the European Union (EU) and many other countries where VAT is a standard tax. VAT IDs can consist of up to twelve characters and can contain both numbers and letters. Many countries will have their own suffix to make identification easier, for instance, DE for Germany and FR for France.  

This is distinctly different from a country like the US, which does not have a VAT system. Instead, they use a sales tax system, and businesses use identifiers like the Employer Identification Number (EIN). Other countries, such as India, use a Goods and Services Tax Identification Number (GSTIN). This number serves a similar purpose as a VAT number. 

What is a Value-Added Tax?

As we mentioned above, VAT number stands for value-added tax number. Some also refer to it as a value-added tax identification number. It’s a consumption tax that VAT nations apply at each stage of the supply chain where value is added to a product or service.

Unlike a sales tax, which is only collected on the final sale of a product, VATs are collected throughout every stage of production and distribution. However, you only add VAT on the value added at each stage, not the entire transaction value.

For example, let’s say you’re a manufacturer out of the UK, and one of your wholesale clients is from Portugal. When you make a sale to that client you would charge VAT on the sale. The wholesaler would then be able to reclaim the VAT paid on that sale once they sell the goods to a retailer, and the retailer can reclaim the VAT once sold to the consumer. While each member of the supply chain pays the tax, the end tax burden ultimately falls on the consumer. 

The overall goal of VAT is to increase a country’s tax revenue without unfairly taxing higher income individuals. The system aims to tax consumption rather than income, which means people contribute based on their spending habits. 

What countries collect VAT?

At the time of writing, more than 170 countries currently collect VAT. This includes most countries that are part of the EU, Canada (where it’s combined with GST in some provinces), and Australia. Though their individual collection numbers tend to differ, the average VAT is 21.6%, but these rates can vary wildly from country to country.

For instance, Germany applies a VAT of 19% while Sweden adds 25%, and some countries such as Canada have rates as low as 5%. Comparatively, the average combined state and local sales taxes in the US come in at just over 6%.

Does your business need a VAT number?

The idea that only large companies need a VAT number is a common misconception. In truth, if your business operates in a VAT-collecting country, you may need to register for a VAT number, depending on the country’s regulations.

For example, in the UK, businesses only require registration past a certain annual turnover threshold. Some EU countries even have a tax relief scheme for businesses with low turnover, exempting them from VAT payments while still requiring registration.

Something important to note is that Value-Added Tax doesn’t only apply to physical goods. You’ll also need to factor it in for any services, such as digital products or consulting. Therefore, businesses that offer these services across borders may also need to register for a VAT number. 

While the general rules and regulations of VAT are similar across borders, each country’s process tends to differ slightly. Remember, this is a legal obligation. It’s important to remain in compliance, especially if you’re a foreigner doing business across borders. 

An often overlooked part of having a VAT number is that it’s a sign of trust. Operating across borders requires building and maintaining relationships with the locals in order to maintain supply lines. Not having a VAT number is the first sign that something might be amiss, and it may prove a hindrance. Even if you don’t strictly need a VAT number, it may be best to register for one anyway.

How do you register for a VAT number?

The process of registering for a VAT number varies from country to country but generally follows a similar structure. Here are some of the typical steps you would need to take when applying for a VAT ID number:

1. Determine the appropriate tax authority: Each country has its own regulatory body for VAT. For example, the UK uses HM Revenue and Customs (HMRC), while Ireland uses the Revenue Online Service (ROS).
2. Gather Required Documentation: This may include a national insurance number, a unique taxpayer reference (UTR), and detailed business data such as revenue, turnover, and projected revenue.
3. Complete the Registration Process: Depending on the country, you may be able to register online, via post, or through an authorized agent. However you choose to apply, ensure you submit all required documents accurately to avoid delays.

Keep in mind that VAT is a requirement regardless of whether you have a VAT number or not. If you register late, you’ll need to go back through your records and retroactively pay the total you owe, including any penalties you may have incurred.

How inFlow Inventory Can Help with VATs

Adhering to VAT compliance is no easy feat. But luckily our software inFlow can make it much more manageable. inFlow streamlines your inventory management processes while helping you track and organize tax requirements like VAT. With inFlow, you can:

• Automatically calculate VAT on transactions.
• Easily generate tax-inclusive pricing schemes on sales orders.
• Save a specific taxing scheme and pricing scheme to a customer record.
• Manage multi-country inventory and tax reporting with ease.

Additionally, inFlow has everything you would expect from a complete inventory management system, including barcodes, reorder points, and real-time inventory tracking.

Conclusion

If your business operates out of the EU or any of the other 170 VAT countries, obtaining a VAT number is essential. Whether you’re selling physical goods or offering digital services, understanding VAT regulations is key to not only avoiding penalties but also building trust in international markets. While the process can seem daunting initially, you can start in no time with just a bit of research and preparation.

The post How to Manage VAT Numbers for International Businesses appeared first on inFlow Inventory.

• Construction procurement is a strategic process focused on long-term goals like supplier/vendor relationship management and involves sourcing materials and specialized labor.
• Procurement in construction is crucial because projects rely on a steady supply of labor and materials. Effective construction procurement will help businesses manage fluctuating costs supplier shortages, and avoid delays.
• Smaller construction companies often face resource constraints, including limited cash flow and smaller procurement teams, which can hinder their ability to secure reliable suppliers.
• Key procurement steps include identifying needs, evaluating suppliers, requesting quotes, negotiating terms, and issuing purchase orders while maintaining clear documentation like requisitions and contracts.
• Some best practices for efficient procurement in construction include building strong supplier relationships, leveraging accurate demand forecasts, and using specialized inventory and procurement software.
• The procurement process involves suppliers (raw materials), vendors (finished products/services), contractors (skilled labor), and project stakeholders (clients), all of whom play distinct roles in project success.

Construction procurement is a strategic process for managing a construction project. It involves numerous methods to ensure that services, materials, and labor are delivered and allocated efficiently. Effective procurement ensures transparency, risk management, and quality assurance by providing clear project requirements, selecting qualified contractors, and overseeing the project’s completion.

Why is construction procurement important?

Construction businesses rely on maintaining a steady supply of both labor and materials to deliver projects on time. Procurement is an integral part of maintaining a consistent workflow. This is due to a few factors.

Construction projects are naturally large-scale, expensive endeavors. For example, the average cost to build a house in 2024 was $428,000. Not only are they expensive, but they also take time to complete. Building a relatively small project, like a house, can take weeks, months, or even years. What does this mean for construction procurement?

First and foremost, construction material costs fluctuate regularly, and considering that construction projects require so many materials, even slight price differences can lead to hundreds or thousands of dollars. And because of the extended time frames, construction projects are often susceptible to multiple fluctuations in price.

Another common issue is supplier shortages. Construction requires a broad range of materials, many of which are in high demand and subject to seasonal market shifts. Sourcing these materials is detrimental to finishing on schedule. However, finding multiple reliable suppliers can be difficult and takes time. 

Poor inventory management is another common mistake that can be disastrous. An inadequate tracking system means you have the potential to run out of a key component at a critical moment. In the worst-case scenario, this could throw off the timeframe for the entire project.

Lastly, logistical inefficiencies can have a cascading effect. Shipping delays and other complications are common. If every shipment is a day late, that adds up to a lot of lost working time.

Procurement vs. purchasing in construction

It’s easy to mistake procurement and purchasing for being one and the same. After all, the two practically share definitions. However, the differences between construction procurement and purchasing are important.

One significant difference between purchasing and procurement is the goal. Usually, businesses purchase something to solve an immediate problem, such as a lack of inventory. It can also be a problem unrelated to sales, such as emergency repairs for the warehouse or offices. 

Procurement is a more strategic process. It generally has more to do with long-term goals, such as selecting suppliers and managing relationships with those suppliers. Effectively managing these relationships will require someone with a specific skill set and experience in procurement. 

However, procurement in construction extends beyond just materials and can also involve sourcing specialized labor.

Unique procurement challenges faced by small businesses

In 2023, the U.S. Small Business Administration reported 33.3 million small businesses in the U.S., making up 99.9% of all U.S. businesses. There are challenges to maintaining any business, but the construction industry poses unique ones for smaller businesses.

For one, they tend to operate with fewer resources at their disposal. This can include materials, tools, workforce, and storage space. And, of course, there are reduced cash flows to consider. When you operate with a smaller safety net, it can be easy to fall into the red zone and incur losses.

Smaller organizations also tend to have smaller teams dedicated to construction procurement. This might not seem like a big deal, but finding suppliers takes time. Having more staff dedicated to finding them is often worth the extra cost, but not every company can afford it. 

What does the construction procurement process look like?

In general, the construction procurement process looks fairly similar between projects. In most instances, you can expect the process to look something like this:

• Identify needs: Before purchasing anything, it’s essential to determine what the project requires. In construction procurement, this often means figuring out the necessary material quantities, but it also refers to sourcing different types of contractors. There’s a lot that goes into constructing a building, after all. 
• Write a purchase requisition: Once the numbers are final, it’s time to write a purchase requisition. Some small businesses may be tempted to skip this step, but keeping a paper trail is important. It often becomes necessary somewhere else in the process. 
• Evaluate suppliers: Many suppliers offer similar goods, but they may differ in price, as well as other aspects like quality. There are also reliability and lead times to consider. Even if one supplier looks like the perfect partner, it’s best to shortlist a few. 
• Request quotes: Next, it’s time to make contact. Get in touch and ask for a quote regarding the on-hand project. As we said above, it’s best to contact more than one. Some vendors may be unavailable or limited in how much they can offer. 
• Negotiate terms and write a contract: Afterwards, you’ll need to negotiate a price. Even if the vendor states one price, they may be able to offer better deals for bulk purchases. A contract is also important to protect both parties and maintain documentation. 
• Issue purchase orders and manage purchases: Once all relevant parties agree, it’s time to purchase! Once materials arrive, that’s it — it’s your responsibility now. You’ll need to store them and maintain the supply on your own.

Depending on the project, procurement in construction may follow different steps. Some materials may require special permits or labor, and those introduce additional bullet points in the procurement process.

Construction procurement best practices

Keep in mind that a large part of construction procurement is managing relations. A supplier’s prices may increase to reflect the market, or they could find themselves in a shortage. These things happen, and it doesn’t mean you should cut ties and find a new supplier. Shortages and price increases often affect many suppliers, after all.

It’s also important to develop accurate demand forecasts. Procuring too many materials eats into profits, and procuring too few can halt progress. Accurate forecasting helps prevent these issues.

Managing inventory is another integral piece of the process. There are various types of inventory to consider, and losing track of materials can be catastrophic. Some construction materials may also require special storage. For example, some raw goods are more susceptible to humidity and require careful consideration.

Lastly, it’s imperative to leverage the right tools. In today’s digital age, that often means using software. Accounting software can keep your books up to date, and field management software, like inFlow, will help you track purchases and inventory levels. inFlow even integrates with accounting software like QuickBooks Online and Xero, eliminating a lot of double data entry.

Who are the key players in construction procurement? 

We’ve referenced a few parties involved in the construction procurement process, but having a clear idea of roles is never a bad thing. For instance, “supplier” and “vendor” are often used interchangeably, but there’s some important nuance between the two.

• Supplier: Generally speaking, a supplier handles raw materials, such as concrete, lumber, and so on. They usually deal in huge quantities and leave the construction companies to handle the rest. 
• Vendor: On the other hand, vendors usually sell a finished product or offer a specific service. For example, they may sell wooden furnishings like cabinets or offer advanced electrical work. 
• Contractors: These individuals will make up most of the workforce. They’re usually skilled laborers like carpenters, roofers, or electricians. Making a structure habitable requires many niche skills; you’ll often need to find external parties that hold these skills.

Though they’re not directly involved, project stakeholders are also an essential part of the ecosystem. Since they’re the ones seeking a business to do work, they naturally have an interest in the rest of the procurement process.

Wrapping up

And there you have it! A lot goes into construction procurement, and it’s important to remember that project needs will differ. Some may require special permits, hard-to-source materials, specialized labor, and so on. Identifying those needs and adapting to them on the go plays a huge role in success.

The post What Is Procurement in Construction? Definition and Best Practices appeared first on inFlow Inventory.

• Gross profit margin is what % of each sale is profitable. 
• The gross profit margin formula is: gross profit margin = Net sales – COGS / Net sales
• A business can use it with other KPIs to indicate financial health.
• It differs from gross profit. 

Maintaining healthy long-term cash flow is crucial for any business. But, there are a lot of factors that go into determining revenue, and there are a lot of indicators that organizations look at when assessing health. One of these indicators, of course, is gross profit margin.  

At a glance, this metric tells a business how much they earn on each sale. Over longer periods, it serves as a valuable indicator of business health. However, like many business metrics, there’s often confusion surrounding gross profit margin.

So, today, we’ll go over what it means for your business and what factors affect it. We’ll also touch on some similar terms and give you some common strategies you can use to increase your overall profit. 

What is gross profit margin? 

This popular metric is a financial figure that companies use to analyze their financial health. It refers to leftover profit after accounting for cost of goods sold (COGS). In essence, it shows how much money a business makes after accounting for its operating expenses.

Gross profit margin vs gross profit

An important note here is that gross profit margin vs. gross profit are not the same thing, despite the similarities. Gross profit margin is expressed as a percentage of total sales, while gross profit is the sum of total profits and is expressed as a dollar value.

What is a good gross profit margin?

A “good” margin varies depending on your industry. For example, retail and food services consider 20-40% as good, while manufacturing companies use 25-35% as a benchmark.

Generally, any number above 10% is acceptable, while 20% to 30% is considered good, depending on the industry. For high-margin industries, anything above 50% is often seen as excellent. Very few industries will see margins this high. 

How to use the gross profit margin formula

Here’s how to calculate gross profit margin using the gross profit margin formula. 

Generally, you should be aware of your businesses’ COGS and net sales already. They’re vital figures to keep track of and contribute to calculating other useful health indicators as well. 

For this example, we’ll pretend that the net sales and COGS are $275,000 and $200,000, respectively. Do note that figures usually aren’t so clean. This is just for the sake of example. Once we plug the figures in, this is what it looks like: 

Gross profit margin (GPM) = 275,000 – 200000 / 275,000

Now, we can solve to figure out the final margin. 

GPM = 75000 / 275,000

GPM = 0.27 or 27%

How does gross profit margin impact your business decisions?

To be clear, making decisions based solely on a single data point is a bad idea. It’s very rare for one indicator to tell the whole story. It’s just as important to know what contributes to the final figure because, as we mentioned earlier, gross profit margins can vary depending on your industry.  

For example, let’s say your business has a gross profit margin of 12%—a little on the low end, but nothing too out of the ordinary. You could leave things as-is and be perfectly fine, but there might be an issue hiding behind that 12%. 

One product, for example, might be selling exceptionally slow, while another you can barely keep stocked. In these instances, it could be worth selling the slow-moving product at a lower cost and replacing it. Cases like these are common, and looking at just gross profit margin doesn’t tell the whole story. 

However, it’s also true that it’s a very valuable figure. While it doesn’t tell the whole story, it does give you a great bird’s eye view of your overall business success. Because we express gross profit margin as a percentage, it also tells us how much a business makes on each dollar. 

1% means 1 cent every dollar, 5% means 5 cents, 25% means 25 cents, and so on. 

If your margin suddenly dips, that’s a good indicator that there’s something wrong, internally or externally. Here are some common factors that affect the final figure. 

Cost of goods sold 

Your cost of goods sold reflects how well your business operates and how well it reduces its overall operating costs. The lower your COGS, the higher the margin. When calculating gross profit margin, it’s important to have accurate numbers for your cost of goods sold. 

Pricing strategies 

Pricing products based on the overall landscape is usually a good idea, but no matter what you decide, it’ll have side effects. For instance, a higher sale price means more profit but a greater chance of getting undercut by your competition, which means lower sales. Pricing products lower will mean less profit, but you’re likely to bring in more sales. Be sure to find the balance that works best for your business. 

Inventory management 

Believe it or not, inventory management is crucial to a company’s margin. The route products take from purchase to sale significantly impacts their COGS. By extension, it affects gross profit margin. Losing or delaying shipments lowers revenue, and optimizing routes and processes is crucial to long-term success. 

Global affairs

Sometimes, things just happen. The year 2020 brought us a lot of things, and it also taught us a lot about business operations. While COVID is now largely in the rearview, its effects continue to linger, and most are simply beyond control. 

Best practices for improving gross profit margin

Increasing your gross profit margin is usually a slow process. It requires an overall reflection on your business operations, so while small changes will have an effect eventually, it will take time to show progress. 

Something worth noting here is that focusing on one aspect impacting your profit margin will cause the others to suffer. It’s best to hone in on several areas with the biggest impact on your bottom line and improve them simultaneously. 

This means not just raising prices or increasing sales but also identifying deadstock and lowering operating costs. You’ve probably heard, “a penny saved is a penny earned,” and it applies here pretty well. Lowering operating costs might not be as grand as increasing sales, but it also increases profit margins. 

Lower COGS 

We already went over COGS, but it’s worth rehashing. The COGS ultimately dictates how much profit is left after a sale. Lower COGS and increase profit. You can improve your COGS by reducing waste, optimizing stock levels, and negotiating better supplier terms. 

Lower operating costs 

Operating costs aren’t part of COGS but are another factor at play. Employees need their wages, warehouse owners need their rent, leases, and taxes need to be paid, and so on. These costs also eat into your bottom line, so lowering them where possible will increase the gross profit margin. 

Upsell 

Selling existing products at a higher price can be a simple way to increase margins. However, product pricing is ultimately decided by consumer demand, so this requires lots of market insight. 

Purchase at scale

For products that sell year-round, buying in bulk can sometimes be best. The rule of thumb is that the more you buy, the less it costs per unit. If you can take advantage of this ahead of time– and can afford upfront costs– purchasing at scale can substantially increase margins. 

How inventory software can help increase your gross profit margin

Every business’s goal is to achieve the best possible gross profit margin, but achieving that goal can be daunting. However, adopting modern software solutions is a simple way to get the most bang for your buck. 

Our inventory management software, inFlow, can help you improve your gross profit margin in several ways, including:

• Real-time inventory tracking
• Accurate cost tracking
• Purchase order management
• Barcoding 
• Reporting

Optimizing your inventory management might not solve all your problems, but it’ll make a world of difference.

The post Improve Your Gross Profit Margin With Efficient Inventory Management appeared first on inFlow Inventory.