Pass-through pricing charges the customer for a cost the seller incurs on their behalf, moved across at or near cost rather than marked up. Freight, fuel, tariffs, raw material indices, and third-party licenses are the usual candidates.

Three mechanisms carry it. A surcharge sits beside the base price as a separate line and can be removed when the cost recedes. An index clause ties the price to a published benchmark and adjusts on a stated schedule. A cost floor triggers an adjustment only once movement passes an agreed threshold. Whichever is used, the clause belongs in the contract, because a pass-through nobody agreed to in advance becomes a negotiation the moment it appears on an invoice.

Buyers accept the principle and audit the execution. They know when their own input costs moved, they read the same indices, and they notice that surcharges tend to appear within weeks of a cost rise and linger for quarters after it reverses. That asymmetry is the fastest way to convert a legitimate mechanism into a credibility problem across the account base.

Lag is where the money goes. Quarterly adjustment against monthly cost movement means the seller absorbs the gap every time, and in volatile inputs the gap is not small. It reads as margin erosion with no decision behind it, because there wasn’t one.

Pass-through is not cost-plus pricing wearing a different name. It isolates volatile inputs so the base price can stay value-based instead of drifting with commodity cycles. Done well, it also spares you the price increase conversation every time a supplier moves. Reach out to Acustrategy to get the clause right before the next cost spike tests it.