Is Your Retail Recovery Audit Tariff Ready?

Attained special pricing for core SKU items? Recently changed sourcing strategies to mitigate the impact of tariffs this year? Pulled shipments forward to be delivered before the next tariff deadline?

If any of these scenarios sound familiar, then you’ll want to pay special attention to your retail recovery audit this year. It might not seem obvious, but these margin protection tactics are actually putting those gains at risk. We know because we experienced them firsthand during the last tariff cycle.

An audit conducted for a mass merchant, for example, uncovered more than $2M in missed cost concessions tied to tariff-related negotiations. The culprit? Terms were not fully captured in the ERP system. Instead, they were buried in emails, eroding margins until they’re discovered.

Change exacerbates financial leakage, and if the retail industry has learned anything from the first half of 2025, it’s that the only constant is change.  With today’s tariffs broader than before and shifting by the hour, the risk is even greater. Here’s why.

The Financial Risks Tariffs Pose    

In retail recovery auditing, most recoveries are based on reviewing the negotiations between buyers and suppliers, and identifying where negotiated deals were not accurately captured or completely processed within the retailer’s systems.  Retail audits typically generate $1M in recovered financial leakage for every $1B in annual retail sales.

If this is the norm, imagine the potential financial leakage your organization may be exposed to if you’ve recently changed supplier terms, implemented price increases, or diversified your supply chain in response to tariff volatility. Also consider how shifting tariff rates further complicates matters, such as the latest tariff announcement that now applies a 50% rate to 400 finished goods categories made with steel and aluminum.

That kind of spike can lead to unexpected margin erosion if not properly reflected in your systems. It can manifest as pricing and invoicing errors resulting from unplanned adjustments or surcharges, or may lead to compliance penalties and audit risks if incorrect tariff classification or origin declarations are applied.

Determining Your Retail Recovery Audit’s Tariff Readiness

With finance leaders eager to ensure the financial health of their organization, taking a proactive stance to cover potential gaps in your retail recovery audit this year will be key to reducing leakage. It will require going beyond your current audit process and examining unlikely sources, such as item master files.

To determine whether your current recovery audit program is prepared to address the gaps that are bound to happen due to tariff volatility, ask yourself the following questions:

• Has your team properly uploaded negotiated/renegotiated supplier terms and concessions into the ERP? You’ll want to validate whether the correct tariff rate has been applied to your latest invoice. Cross-reference buyer emails, item master files, and vendor trade agreements, among other sources, to ensure proper implementation.

• Were the agreed-upon duties/tariffs correctly reflected in landed costs and pricing systems? Incorrect duties can result in compliance penalties and risk. Refer to your customs broker records, item master files, and vendor trade agreements as potential sources to determine if this has been done.

• Are cost-sharing agreements or price protections being followed per the agreed-upon terms? Again, review supplier communications to determine if agreed-upon terms are being followed. You’ll also want to look at vendor trade agreements to verify and note any tariff-specific clauses.

• Are there any additional fees being added to your invoice that could be a duplicate? It’s not uncommon for duplicate freight and surcharge fees to be included in your invoices. You can usually find them hidden in your freight bill or third-party logistics (3PL) invoices. 

• Has the correct Harmonized Tariff Schedule (HTS) code been applied to an item? Keeping up with changing HTS codes can be challenging, but it's essential to ensure the proper HTS code is used, as the duty rate is determined by it. Fail to do so, and you might find yourself at risk of inflated costs for months before it's detected. The item master file will help you determine if this is the case.

• Have you missed any chargebacks for items a supplier may have overcharged? In today's fast-paced environment, keeping up with rebates or overpayments on promotional funding can be difficult. It’s even harder if you’re relying on manual tracking or if negotiations are unclear.

Getting Your Retail Recovery Audit Tariff-Ready

It's a given that tariff complexity will pose a significant challenge to your retail recovery audits this year. Yet the best way to prepare is to put in the proper safeguards now to curtail margin erosion tomorrow. To ensure all your bases are covered and maximize recoveries, you'll want to partner with a proven provider with tariff experience.

We cover what to look for and more in our latest guide: Margins at Risk — How Tariffs Create Financial Leakage and How to Recover It. Download your copy today to get prepared.