Checklist: Evaluating Die Casting Supplier Financial Health

Why financial health matters for die casting sourcing

A die casting supplier that is short on cash can still deliver a first article today. The problem appears when volumes increase, tooling costs are due, or a customer cancels a large order. At that point, payment terms, tooling deposits, and production priority become the real issues.

This checklist focuses on supplier financial health. It gives you a practical way to judge whether a vendor can support your parts for years, not just through qualification. The goal is to reduce vendor risk assessment uncertainty by checking the numbers and signals that matter in a metal casting environment.

Check cash flow and working capital

Start with the cash position. A supplier needs cash to pay for aluminum or zinc, heat treatment, plating, tool maintenance, and wages. If cash is thin, every other decision gets harder.

1. Ask for the most recent balance sheet or a summary of cash, accounts receivable, and accounts payable.
2. Ask how many days of operating costs are covered by current cash.
3. Ask how long it takes to collect payment from their largest customers.
4. Ask whether they hold a revolving credit line or term loan, and whether the facility is currently used.
5. Ask if any receivables are past due and whether a customer is disputing an invoice.

Red flags:

• Cash is used to pay tooling vendors or payroll.
• Receivables are aging for many weeks or months.
• The supplier asks for prepayment on routine orders.
• They cannot explain a sudden increase in accounts payable.

A healthy supplier does not need to share every detail, but they should be able to explain how they cover day-to-day costs. If they resist even a general answer, treat that as a warning.

Review credit terms and payment behavior

Credit terms are a practical test of financial stability. A supplier that can offer net thirty or net forty five days is usually comfortable with its own cash position. A supplier that pushes for upfront payment, especially on repeat orders, is often managing a cash gap.

2. Compare their standard terms with what they offered during qualification.
3. Check whether they ask for a deposit on tooling and whether that deposit is refundable after first article approval.
4. See if they offer discounts for early payment.
5. Ask how they handle a disputed invoice or a late shipment.

Red flags:

• Terms change after the first order without explanation.
• They request a deposit for routine production after already delivering samples.
• They are slow to send invoices.
• They ask you to pay a specific supplier directly for raw material.

Clear credit terms reduce vendor risk assessment. They also show whether the supplier trusts its own cash flow. A stable vendor will not pressure you to pay early unless there is a real reason, such as a raw material price lock.

Evaluate customer concentration

A supplier that depends on one or two customers is exposed. If a major account drops volume, the plant may idle machines, lay off staff, or cut maintenance. In die casting, that gap shows up quickly.

3. Ask what percentage of revenue comes from the top three customers.
4. Ask how long the largest customer relationship has been active.
5. Ask if any major customer is in a declining industry or facing its own supply chain issues.
6. Ask whether they have a pipeline of new work that is not yet contracted.

Red flags:

• One customer accounts for a large share of revenue.
• The largest customer is in a seasonal or volatile industry.
• The supplier has few contracts that go beyond the next quarter.
• They cannot name any new customers they have qualified in the last year.

A balanced customer base is a strong sign of financial stability. It does not need to be perfect, but the supplier should show a mix of industries or product types that smooths out demand.

Look at margins and pricing discipline

Thin margins leave little room for error. If the supplier is barely covering cost, a small scrap increase, a heat treatment failure, or a raw material spike can turn a profitable order into a loss.

4. Ask how they handle raw material price changes.
5. Ask whether they use a price index or a fixed quote for a period.
6. Ask how often they review cost structure for repeat parts.
7. Ask if they have a scrap allowance and how it is calculated.

Red flags:

• They quote very low prices and then ask for a price increase after the first lot.
• They do not have a clear process for adjusting prices when material costs change.
• They absorb all scrap cost without a defined threshold.
• They cannot explain how tooling amortization is handled on low-volume parts.

A stable supplier has a pricing model that is transparent enough to explain. They may not share all formulas, but they should be able to walk you through the main cost drivers: material, labor, tooling, finishing, and overhead.

Assess delivery reliability and capacity

Financial health shows up in delivery. A supplier that is underfunded may cut maintenance on presses, skip heat treatment, or delay plating to save cost. That leads to inconsistent parts, rework, and late shipments.

5. Review the last six months of on-time delivery.
6. Ask about any shortages of mold, core, or finish capacity.
7. Ask how they handle a sudden increase in demand.
8. Ask if they keep spare molds for critical parts.
9. Ask about their quality control process after finishing.

Red flags:

• Delivery dates move without notice.
• They ship late and then ask for a credit memo.
• They have no backup plan for a failed mold run.
• They do not track scrap rate by process.

A reliable supplier tracks these metrics and can explain when they missed a date. They should not hide a problem. They should tell you what they are doing to fix it.

Review financial statements and external signals

You do not need a full audit to make a good judgment. You do need enough information to see whether the supplier is stable.

Check item	What to look for	Red flag
Cash and receivables	Cash covers operating costs for several weeks	Cash is low and receivables are aging
Customer mix	No single customer dominates revenue	One customer is a large share of sales
Credit terms	Net thirty to net sixty days	Prepayment is required for routine orders
Pricing structure	Clear method for material and labor changes	Prices change without explanation
Delivery record	On-time delivery is consistent	Frequent late shipments and rework

6. Ask for the last two years of income statements or a summary.
7. Check if the supplier has a history of legal disputes with employees or suppliers.
8. Ask if they have a business continuity plan.
9. Ask how they manage insurance for molds and production assets.
10. Ask if they have a quality management system that is audited by customers.

Red flags:

• They cannot provide any financial summary.
• They have multiple customers in default.
• They have a history of changing management frequently.
• They do not have insurance for critical molds.

External signals matter, but they are only a starting point. The real test is whether the supplier can explain its position clearly and without pressure.

Build a simple scoring method

Use the checklist to score each supplier. This keeps the decision practical and repeatable.

1. Cash flow: 1 to 10.
2. Customer concentration: 1 to 10.
3. Credit terms: 1 to 10.
4. Pricing transparency: 1 to 10.
5. Delivery reliability: 1 to 10.

Give a weight to each area based on your risk. If your parts are critical and low volume, weight delivery reliability higher. If your volume is high, weight customer concentration and cash flow higher.

A supplier with a low score in one area may still be usable, but you need a reason. A supplier with low scores in two or more areas is a higher risk for long-term sourcing.

This scoring method helps you compare vendors fairly. It also gives your team a clear record of why a supplier was chosen or passed over.