A CNC shop without clear work orders and contracts is vulnerable to scope creep, payment disputes, and lost profit margins. The difference between a thriving custom machining business and one that bleeds money through ambiguous agreements is often just a few pages of well-drafted paperwork. Let's walk through the essentials.
Why CNC Shops Need Formal Work Orders
Verbal agreements are poison in custom manufacturing. A customer says they want "a part machined to spec," but doesn't mention tolerance stack-up, surface finish requirements, or quantity thresholds that change your setup time. Six weeks later, they reject the work because expectations diverged.
A work order becomes your operational and legal baseline. It documents part geometry, material grade, quantities, delivery timeline, and who pays if changes happen mid-production. For CNC work—where each part is often unique—this specificity protects you.
Core Elements of a CNC Work Order
Your work order should include:
- Part identification & drawings: Reference number, PDF attachment, revision date. Never rely on verbal descriptions.
- Material specification: Alloy type, bar stock size, grade (e.g., 6061-T6 aluminum, AISI 1045 steel).
- Quantity & unit price: State total parts, price per piece, and minimum order quantity if applicable.
- Tolerances & finish: General tolerance class (ISO 286, or ±0.005"), surface finish (Ra value or "as-machined"), and any secondary operations.
- Lead time: Specific delivery or completion date. If you need 3 weeks and the customer expects 5 days, clarify this upfront.
- Payment terms: Net 30, Net 45, or deposit + balance. Many shops require 50% upfront for custom work.
- Change order protocol: State that any design or scope changes require a written change order and may incur additional costs.
Contracts for Larger or Recurring Relationships
For ongoing customers or high-value jobs (typically $5,000+), move beyond a one-off work order to a service agreement. This isn't about complexity—it's about protecting both parties.
A basic CNC service contract should address:
- Intellectual property: Clarify who owns the tooling, fixtures, or part designs. In most cases, the customer retains IP for their design, but you may retain tooling.
- Liability limits: CNC work carries risk of tool breakage, scrap parts, or schedule delays. Cap your liability to a reasonable percentage of the contract value—typically 1–3 times the total job cost.
- Dispute resolution: Include a clause stating disputes go to mediation or arbitration before litigation. This saves legal fees.
- Termination: Define how either party can exit if circumstances change (e.g., customer cancels the order, or you discover the job is uneconomical).
- Confidentiality: Protect your processes and the customer's designs if necessary.
Don't overthink it—a 1-2 page agreement is often enough for most CNC relationships.
Pricing & Payment Strategy
Many CNC shops underprice custom work because they don't account for setup, tooling, inspection, and waste. Work orders should reflect true cost.
Typical pricing models:
- Job-based: Fixed price per part or per job. Requires accurate job costing upfront.
- Hourly + materials: Useful for experimental or uncertain jobs (e.g., R&D prototyping). Charge $75–$150/hour for CNC operation, depending on region and equipment complexity.
- Deposit + balance: Collect 25–50% before starting, final payment on delivery. This reduces cash flow risk.
For prototype or low-volume work, add a setup charge ($300–$2,000 depending on complexity) separate from the per-piece price. Don't absorb setup into the unit cost—that math breaks when customers want 5 pieces instead of 50.
Getting Customers & Standing Out
Once your pricing and contract framework are solid, you need visibility. Listing your CNC services on platforms like Mercoly—where manufacturers actively search for machining partners—puts you in front of qualified leads without guesswork. A clear service listing, portfolio of past work, and your standard terms build trust immediately.
Frequently Asked Questions
Q: Should I require a deposit before starting a CNC job? Yes. A 25–50% deposit is standard for custom work. It covers material cost upfront and signals customer commitment. For repeat customers with solid payment history, you may reduce this to 10–20%.
Q: What happens if a customer requests changes mid-production? Stop work, prepare a written change order detailing scope, cost, and timeline impact, and get customer approval before resuming. This prevents disputes and protects your margin.
Q: How do I handle tool breakage or scrap parts? Clearly state in your work order whether the customer absorbs 100% scrap cost, or if you cover waste up to a certain percentage (e.g., 2–3% scrap allowance is typical). Document any breakage in writing and notify the customer promptly.
Ready to standardize your process and win more CNC work? Start by documenting your next three jobs with detailed work orders—then reach out to new customers through channels where they're actively looking.