Fuel Surcharge Clause

Discussion in 'Business Operations' started by okeefl, Mar 2, 2008.

  1. okeefl

    okeefl LawnSite Member
    Posts: 155

    I am going to implement this in addition to raising current prices, tell me what you think about the wording. If anyone else would like to copy it for your use feel free.

    Fuel Surcharge Clause

    With the ever rising cost of fuel and petroleum based products, which are vital to operating our business XXXXXXXXXXX will be assessing a fuel surcharge as outlined below.

    A fuel surcharge totaling 3% of the Clients monthly invoice amount will be added for each 50 cent increment that fuel, either (gasoline (89) or diesel) rises above $4.00 per gallon (monthly average). Fuel pricing information will be obtained from AAA’s Fuel Gauge Report and based on the monthly average for Florida.

    Example: Client A’s monthly invoice is $90.00 and the Florida monthly average for gasoline was recorded at $4.35 per gallon a 3% surcharge would be added to the monthly invoice creating a new total for that month of $92.70.

    Example: Client A’s monthly invoice is $135.00 and the Florida monthly average for diesel was recorded at $4.76 per gallon a 6% surcharge would be added to the monthly invoice creating a new total for that month of $143.10.

    We apologize for any inconvenience this may cause you, however our prices for this year’s contracts are based on fuel prices remaining under $4.00 per gallon.
     
  2. Ferti-man

    Ferti-man LawnSite Senior Member
    Posts: 252

    I like the idea. I would change the second client example from client A to client B. Remove the (89) from you fuel option section, IMO it is not needed.
    How much time will it take to track this and then add to each invoice as a line item? For the extra time of the paperwork, will you get a reasonable return? Just asking? I am trying to work out the logistics of implementing late fees as well as interest on late pays. I cannot automate the Fee option (so far) and wondering if the manual tracking is worth it considering all the work I have to do!
    Not sure what the answer is, but on surface, it is a good idea.
     
  3. okeefl

    okeefl LawnSite Member
    Posts: 155

    Gotcha on the A to B change. I put the 89 in because that is what I purchase for my mowers and was considering 3.99 9/10 for 87 as compared to over 4.00 for 89. I am not sure of time and tracking yet, but at least it will be enough to recover any loses due to fuel. I am still running numbers and may up the %...not sure yet.
     
  4. Ferti-man

    Ferti-man LawnSite Senior Member
    Posts: 252

    Whats the price of fuel thier now?
     
  5. Meehan47

    Meehan47 LawnSite Member
    from PA
    Posts: 33

    I thought about adding a 3% fuel surcharge to my clients too. But I have a dilemma. I raised most of my customers this year from anywhere from $2-4. I think it would be hard for me to swing both. I might just raise the prices and add the fuel surcharge next year.
     
  6. Atlantic Lawn

    Atlantic Lawn LawnSite Senior Member
    Male, from Outer Banks NC
    Posts: 940

    I ran this by one of my Mgt. Co's, they balked at it. Told me to just go ahead raise my price and be done with it. They needed to present a fixed monthly payment to the HOA and the variables of the pricing up one month and down the next was more than either of us wanted to deal with. So my price went up and I will live with it for 08-09 contract. Hey I'm Happy.
     
  7. okeefl

    okeefl LawnSite Member
    Posts: 155

    Around 3.40 to 3.50 for 89 and 3.70 for diesel.

    This is in addition to small increases for everyone. I will just let them know that the increases are to cover the rise in prices from last year (covers everythinglike blades, grease, fertilizer, etc). I just want the fuel surcharge as a net just in case it does go above 4.00
     
  8. Ferti-man

    Ferti-man LawnSite Senior Member
    Posts: 252

    I think this is the best too as it reduces your paperwork / tracking issues. Hope fuel prices don't get wacky, but that' wishful thinking!
     
  9. Ferti-man

    Ferti-man LawnSite Senior Member
    Posts: 252

    I would consider pricing as if the cost of fuel will increase above these levels. Look at the last two years as a guide. reg unleaded here is around $3.00 right now. Not sure on Diesel.
     
  10. okeefl

    okeefl LawnSite Member
    Posts: 155

    I have priced according to $4.00 fuel, but lets just say for reasons that may not be so strange in todays market fuel hits $5.00/ gallon over the summer I want to have some plan in place to recover the difference.
     

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