of time (a quarter is common), and then send a separate invoice for those surcharges amounts. There is no single way that all


investment casters handle surcharges. The processes are highly varied and can even vary among multiple investment casters supplying the same or similar castings to the same buyer, but using different practices for the charging and collecting of those surcharge funds. To explore the issue, a poll was conducted to determine what the varied surcharge processes are (Figure 2). While not strictly projectable, the trends are apparent: 1. Surcharges are used by the vast majority of metalcasters.


2. Those surcharges are either itemized or included in the selling price, depending on the buyer’s preference.


3. The inclusion of surcharges on invoices is a scattered process, with the definition of usage occurring either, a) during the presales effort or b) after receiving the purchase order from the casting buyer. The poll results do not specifically


indicate how the surcharges will be configured and who is setting the surcharge policy.


As established,


surcharges are calculated based on the weight of the casting and the type of metal used to create the casting. Online resources are available to both buyer and seller that indicate the fluctuating price of the various grades and types of metal available for use in the creation of these castings. Seems simple enough, right? One


would think so, but if the surcharge policy is not clearly defined upfront by


Buyer Questions Are any surcharges included in the casting price? Do you invoice surcharges separately?


Figure 2


the buyer or the seller, then subsequent accounting issues can, and usually do, arise. Currently, many ERP systems have some invoicing capabilities that allow for all of the varied processes of applying surcharges. Yet, still, there is some amount of confusion on the part of the buyer side trying to pay for the castings they received. Perhaps it is that same old business demon—lack of communication.


Most respondents indicated they include their surcharge policy in the terms and conditions of their quote when it is sent to the casting buyer. Others


send along their surcharge


policy when they send an order acknowledgment form to the casting buyer accepting the buyer’s purchase order. Buyers will often send along their terms and conditions on their purchase order including their surcharge policy. Almost all of these definitions, provided by either the seller or the buyer, will indicate how the surcharge is to be


Supplier Questions


We have a base price for the casting, but will need to add surcharges, if necessary; will you accept and pay for them?


Should we itemize the surcharges on the invoice or send them separately?


Do you have a written surcharge policy we can review? We use XYZ Metal Market Pricing to track our metal costs and update monthly, is that suitable to your needs?


How often do you update your surcharge factor and from what source?


February 2020 ❘ 19 ®


calculated and billed. They can be very detailed—as specific as which metal market price tracker to be used. The


problem arises when the


surcharge policy sent by the caster is not in agreement with the surcharge policy sent by the casting buyer. This is where communication comes in. Care should always be taken up front to avoid any downstream negotiations. Investment casting firms have to continue to make money, and sometimes, the metal surcharge is the only way to assure this. Buyers may decide to go elsewhere to get that casting. What’s the answer here? It might be as simple as asking the right questions upfront. Communication will always be the


answer to managing the relationship between seller and buyer. It should never be just about the money; it’s about the future relationship and continued business prosperity. Understanding the same definitions and knowing what to ask can go a long way in making that relationship one based on mutual trust.


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