Fuel Surcharges

Throughout the last 30 years of supporting our Chem-Man software, I’ve seen the price of gas rise and fall. Of course, when it comes to the billing side of things, we get many calls on whether to charge a fuel surcharge and how to do it.

My immediate instinct makes me want to reply, “You have to cover your costs and make a profit to stay in business, so don’t feel bad.”. Remember, your farmers NEED you to stay in business, and know that you can’t run a business without covering your costs. They also know that the fuel price is very high, and they should expect a reflection on their bill.

Sometimes customers will ask us, what is the advantage of raising prices versus adding another line item for fuel surcharge? I have two responses to this.

  1. If you raise the price, most likely, you’re going to pay a higher commission on the cost of the application if you pay commissions.
  2. On the Facebook page “My Job Depends on Ag,” I asked growers if they’d prefer a fuel surcharge vs. a price hike. One grower said: “Surcharges can disappear with lower-cost fuel whereas increased service rates are rarely reduced going forward. Maybe wishful thinking but hope springs eternal.” (Other growers also reflect this).

Of course, no one likes to pay more for anything, and I’ve heard that applicators are willing to go in the hole for their farmers. I can’t imagine doing this, but you can’t always judge what others do. I’ve been guilty of doing this when I see that one of my companies is having a challenging year, but it has to be limited for you to run your company.

The question often is asked, how do you go about creating a separate fuel surcharge?

Answer: You can charge multiple ways. We see users charge by the tach hour, acre, percentage of application, pound, etc.

How much to charge?

Answer: This will have to be a decision that you make on your own. You will have to calculate your additional costs and determine what method best covers these costs for your company. (Outside help such as your CPA is always an option). FYI: Some users modify the price up and down depending on the cost of fuel.

I hope this article helps with some of the worries that are happening with the high fuel costs. Bottom line: Your grower knows that you must make a living. Even if he gripes, make him understand that you’re just passing this cost on, and it’s “hopefully” a temporary cost that will eventually go away.

Y’all stay safe out there!

Regina

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