NPCA Newsletter: Smart Cash Flow Strategies in a Tariff-Impacted Market
- NP Capital Advisors Team
- 5 days ago
- 8 min read
Newsletter article summary: Tariffs can impact cash the moment goods clear customs, which creates a liquidity crunch for seasonal import-driven businesses like toys and automotive. Companies can preserve margin and runway by optimizing product classifications, avoiding rushed production moves, and working collaboratively with existing suppliers to find tariff-advantaged paths. Strong cash-flow discipline and expert negotiation support, like what we provide at NP Capital, give smaller businesses the leverage and options they need to stay resilient in a rapidly shifting tariff environment.
To get in touch, please email us at info@npcapitaladvisors.com.
New Podcast: NP Unfiltered🎤
Check out our latest episode of NP Unfiltered here, which goes over what we discuss in the article below: Smart Cash-Flow Strategies in a Tariff-Impacted Market. Check it out on Spotify here.
And if you missed our first podcast, Using Out-of-Court Restructuring to Improve Cash Flow Dynamics, Lower Debt, and Improve Shareholder Equity, be sure to check it out here.
Smart Cash Flow Strategies in a Tariff-Impacted Market
In industries such as automotive and toy, one reality is now unavoidable: tariffs are here, they’re changing constantly, and they’re directly hitting the cash flow of small and mid-size businesses. You can’t wish them away, but you can design around them.
Tariffs are paid by the importing company at the moment the goods clear U.S. customs, not when they sell. If the majority of your shipments land early in preparation for the holiday, as with many toy and automotive companies, you’ll have months of cash outlay before revenue really kicks in.
This article will go over the five practical steps you should take to assess your tariff impact and plan how to proceed. In a climate where inventory costs more, cash-flow intelligence becomes a strategic advantage.
1: Understand Your SKUs
Every imported product has a code, an HS (Harmonized System) classification, that determines which tariffs apply. The problem comes in when companies simply trust their supplier or freight partner to classify it correctly, and that can be a costly assumption.
A toy might be correctly classified under HS 95, but the subcategory (e.g. puzzles vs. plush vs. electronic toy) can change duties by double-digit percentage points. The same goes for automotive parts, where distinctions such as plastics vs. metal, or CNC-machined vs. molded, can materially shift costs.
In one instance, we worked with a company paying Section 301 tariffs on a plush character that lit up and played sound. It had been classified as a toy under Chapter 95, but legally, the primary function was electronic. Moving it to the proper Chapter 85 code eliminated the 301 penalty and saved them close to six figures a year.
In the automotive aftermarket, a brand selling a universal aluminum turbo piping kit assumed it belonged under 8708, where a 25% tariff on Chinese imports applies. But because it wasn’t engineered for a specific vehicle model, it properly fell under an aluminum articles classification instead, which isn’t on any 301 list. That reclassification saved nearly a million dollars annually.
Reclassification ensures that a product is classified according to what it actually is. For a company importing thousands of units, that correction alone can represent millions preserved annually in margin and liquidity.
2. Wait for the Dust to Settle
When tariff rules change, a company might be tempted to make a knee-jerk reaction to change the location of its production. However, the best course of action is often to avoid hasty decisions and, instead, create interim cash flow solutions to buy time.
While optimizing full-chain sourcing under USMCA (U.S./Mexico/Canada) may be a reliable long-term solution for some, this won’t be feasible for many companies. And tariff rules are constantly changing. This means that trying to gamify one’s supplier location is often futile, as it is unnecessarily expensive to relocate production for the sake of tariffs only for those tariffs to change in a month.
One company that we know preemptively shifted production to Cambodia and Indonesia to avoid tariffs on Chinese imports, but is now moving production back to China due to tariffs on ASEAN countries.
It’s often a good idea to let the tariff dust settle before making major operational location decisions.
3. Work with Your Supplier
Once you’ve validated that a location change is justified and not driven by panic or guesswork, the smartest move is rarely to start from scratch with a brand-new vendor. Your existing supplier already understands your product tolerances, quality expectations, testing requirements, packaging, and launch calendar. That knowledge is capital you’ve already paid for.
Instead of replacing them, bring them into the solution. Well-established Chinese manufacturers often have satellite facilities or partnership networks in Vietnam, Malaysia, India, or Mexico. They can support the transition, manage factory onboarding, and ensure consistent production and QC standards while maintaining your pricing structure. You’ll avoid the steep learning curve, delays, and hidden costs that come with courting new suppliers in a new geography.
4. Evaluate Cash Flow
Tariffs often result in strained cash flow. When liquidity gets scarce, speed and discipline are critical.
As a recap from our past articles, here’s the playbook when cash flow gets tight:
Model the runway: Build a rolling 13-week + 12-month cash forecast so you know exactly when cash runs out.
Prioritize payments: Protect mission-critical vendors and pause or renegotiate everything else. Every dollar preserved extends runway.
Pick up the phone: Proactively communicate with vendors and lenders. Silence destroys trust, and transparency buys time.
Collect what you’re owed: Accelerate A/R, chase overdue invoices, and unlock any internal liquidity (inventory, credit lines, etc.).
Use the time you bought: With stability restored, move quickly toward the strategic solution, which might include raising capital, securing a bridge, or pursuing a sale.
Cash-flow intelligence creates options, which in turn keep companies alive.
5. Reach Out to Experts
You shouldn’t have to navigate this challenge on your own. Experts at NP Capital can help you navigate cash flow challenges and supplier negotiations, leveraging our experience as operators and cross-industry financiers to be strong advocates for our clients.
As a next-generation investment bank and consulting firm, NP Capital works across many industries, which means we’re able to connect dots quickly and bring fresh approaches that have already worked elsewhere.
We also have expert negotiators who play bad cop for you, so you as the business owner don’t have to. Cash preservation requires tough conversations about extending terms, restructuring payments, and renegotiating contracts. Most founders dread those calls, and understandably so. NP Capital steps in to advocate firmly on your behalf while preserving your operating relationships. We take the friction, the tension, and the “back-and-forth” off your plate, so you can stay focused on running the business while we protect your runway.
We give Main Street the negotiating power and strategic awareness that Wall Street often takes for granted. If you’re looking for direct support managing cash flow in the wake of new tariff policies, don’t hesitate to reach out.
Deal Highlights
NP Capital is partnering with a high-growth fast-casual restaurant brand, celebrated for its chef-driven spicy fried chicken concept, to provide CFO and FP&A services.
We are building scalable financial infrastructure, optimizing unit economics across its expanding multi-unit footprint, and implementing the disciplined operating rhythms, reporting frameworks, and performance analytics essential to professionally manage and scale a premium hospitality platform.
This engagement strengthens the foundation for sustained profitable growth and positions the brand to capitalize on future strategic opportunities while continuing to deliver bold, craveable menu innovation to its passionate and rapidly growing national fanbase.
New Team Member
Justin Oltz-Green
Operating Partner, CPG, Automotive, & Toys
"The Scaler"
Justin Oltz-Green is a global executive and investor with over 20 years of experience building, scaling, and transforming businesses across the automotive, consumer products, and manufacturing sectors. He has successfully led growth from early-stage ventures to global enterprises exceeding $400 million in revenue, while driving operational excellence, international expansion, and strategic exits.
Most recently, Justin served as Executive Director of Ventures and Managing Director of APAC for Beach House Group, a $400M ARR brand incubator and consumer goods manufacturer. At Beach House, he launched and scaled multiple high-profile brands, including Florence by Mills, Pattern Beauty, BÉIS, Moon, and Cleen Beauty, building them from concept to market leaders distributed through Ulta Beauty, Sephora, Target, Walmart, and Douglas EU. He built a 50+ person international team, restructured global operations to improve profitability by more than 50%, and closed a strategic exit 25% above expectations.
Previously, Justin was EVP at Injen Technology, where he reversed declining trends in an automotive performance parts manufacturer by improving efficiency 20% and throughput 15%. At Derive Systems, a PE-backed automotive technology company, he scaled revenues threefold and increased enterprise value 10x through Fortune 100 partnerships, acquisitions, and operational restructuring. Earlier, at Eastek International, Justin built the company’s APAC division into its largest region, spearheading growth in plastic injection molding, PCB assembly, and other contract manufacturing services for Fortune 500 clients including GE, Emerson, and Honeywell.
Throughout his career, Justin has specialized in bridging founder-led vision with scalable infrastructure, whether in CPG brand incubation, contract manufacturing, or automotive technology. His expertise includes supply chain optimization, international market expansion, M&A diligence and integration, and turnaround leadership.
Industry Headlines
Trump Outlines Plan to Unwind Biden-Era Car Mileage Mandates
President Donald Trump unveiled his administration's plan to relax stringent Biden-era fuel efficiency standards to lower consumer costs.
The new proposal would lower the Corporate Average Fuel Economy requirement to 34.5 mpg for the 2031 model year and eliminate a credit-trading program used by automakers.
Critics say the proposal will encourage US automakers to produce less-efficient gas guzzlers, while the Trump administration says it will save Americans $109 billion over the next five years.
“Kidults” Are Saving the Toy Industry by Spending Billions
A recent Circana report found that adults (over age 18) accounted for toy sales of $1.5 billion over the last three months of 2024. That made the 18+ demographic the toy industry’s most important age group, as they officially spent more on themselves than on its former most important category: toddlers age 3 to 5.
Toy sales overall have struggled in recent years, but sales to kidults have gone up and to the right.
Circana found that kidults account for 28% of global toy sales, an increase of 2.5% since 2022.
France, Germany Profit Rebound at Risk as Luxury, Car Sectors Struggle
Earnings expectations for France’s CAC 40 and Germany’s DAX indexes next year have been scaled back in recent weeks.
The French and German benchmarks are weighted heavily toward the consumer discretionary and industrial sectors — two industries that might not be able to meet high expectations for next year.
French stocks enter 2026 with a “fragile outlook,” according to BI’s Meng and Douillet, held back by “stretched valuations, uneven earnings momentum and mounting fiscal pressure.”
Cookie-Casino Merger Mulled by Z Capital in Bid to Woo Creditors
Private equity firm Z Capital Group is weighing a plan to combine its casino operator Affinity Interactive with other portfolio companies to assuage some of Affinity’s lenders.
The combined business could generate about $500 million of revenue for Affinity and could include companies such as Mrs. Fields, Apex Hospitality, or Xperience Restaurant Group.
The effort is designed to bolster Affinity’s balance sheet and benefit creditors, as the company’s bonds have been trading in distressed territory for weeks.
China’s AI Toy Market Surges With 30+ Funding Rounds and Hot Launches From Huawei and UBTECH
An unexpected AI market is emerging in China, as companion toys designed for interaction and comfort surge in popularity.
According to Commercial Times, Chinese tech giants including Huawei, JD.com, and UBTECH Robotics have recently entered the AI toy market.
These so-called “AI toys” are not traditional electronic pets but intelligent devices equipped with AI models and emotional-computing capabilities. They feature memory and contextual awareness, enabling them to converse with users in a human-like manner through voice and facial recognition.
US Consumer Sentiment Rises for First Time in Five Months
US consumer sentiment rose for the first time in five months, bolstered by a more optimistic outlook for personal finances as inflation expectations improved.
The preliminary December sentiment index rose to 53.3 from 51 a month earlier, according to the University of Michigan.
Consumers expect prices to rise at an annual rate of 4.1% over the next year, down from a month earlier and the lowest since January, the report issued Friday showed.
About NP Capital Advisors
NP Capital Advisors is a next-generation investment bank and consulting firm founded by a team of experienced entrepreneurs, bankers, and attorneys who have built, operated, and sold successful businesses. The firm offers tailored solutions across M&A, restructuring and turnarounds, and strategy and growth consulting in a variety of sectors. With a performance-driven fee structure and a track record of delivering exceptional results, NP Capital Advisors is dedicated to helping founder-led and emerging growth businesses maximize value and overcome challenges.
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