The purchase agreement should consider all charges that will be made. To properly evaluate the total cost of the transaction, your calculations must include all charges. This seems obvious, but it is common for suppliers to not tell you about certain charges that the buyer must separately incur. For example, the cost of transportation of the goods may not be stated. This is especially the case when the terms are F.O.B. shipping point. The buyer will later find out that he must pay the carrier for delivery.

Other examples of certain charges that may not be included in a bid are the cost of packaging, the cost of service calls, and the cost of any needed training. Sometimes certain supplies are needed in order to use a piece of equipment, but the cost for those supplies are not included. A simple example is a flashlight sold without batteries. Asking the salesperson if anything extra whatsoever is required to use the product may be all that is necessary to ascertain if all costs are included.

Buyers should make sure their accounting department contacts them for approval before paying invoices that include anything not covered in the purchase order or purchase agreement.

A related subject is fees and charges that may not be given proper attention during negotiation. For example, when buying a truck or automobile, either as a consumer or as a business buyer, overlooking proper attention to the financing cost is a mistake. Dealers are given financing rates by banks and finance companies based on the buyer’s credit rating. Some of those financing entities give the minimum rate that the dealer can give along with another higher rate which provides the dealer with a bonus commission if the customer agrees to the higher rate. For example, the minimum rate for a certain customer might be 5% while the bonus rate might be 12%. If the customer does not question the rate or is willing to accept whatever is offered, he receives the 12% rate and the dealer earns a $2000 bonus.

The lesson is clear. Everything must be negotiated and checked. The buyer needs to ask questions on every possible aspect of the purchase. Failing to do so can lead to exorbitant cost for the buying organization but significant added profit for the seller.