Trevor Scott, the owner of Rugby Fitted Kitchens, explains why dealers who don’t adopt a supply only business model risk getting their fingers badly burnt
Lose control of the money and you lose control of the job. That has been the adage around which our entire business model has revolved since day one.
I often hear stories of retailers, who, having agreed large % retentions until the job is complete, then struggle to get all of the outstanding monies from their clients who seem to be able to come up with an endless list of minor, if not downright invented, snags.
Demanding these oft non issues are resolved before settlement is made retailers will struggle onwards endeavouring to finally satisfy these clients in the vain hope of getting fully paid before finally resigning themselves to agreeing on a settlement figure, knowing full well they’ve been had by a client who has successfully chipped them.
Not every KBB business is or can be run in the same way and individuals need to work out what is best for them. Many, for instance, include installation within the total price paid by the client which, of course, then carries the additional burden of 20% VAT. They are either directly employing the installers or paying them on invoice at month end, and it is nearly always this chunk that effectively becomes the retention.
Well, here at RFK, we have always applied a supply only model. We take a healthy deposit of usually 25% on order with the balance becoming due for payment on or just before delivery. This is clearly explained at the point of sale and reaffirmed with our standard terms of payment letter sent out 10 days or so before delivery.
If we don’t get paid, we don’t deliver – simples!
Clients, not surprisingly, want to know what their retention is and, in the case of the majority of jobs that we are ‘installing’ then it is the installation charge that is their retention. But, and it’s a very important but, that outstanding money is paid direct to the fitters and not to us.
We explain to our clients that once the goods are in their home then they are theirs and, not unreasonably, we want paying for them. The service of installing the kitchen is then a completely separate contract which is taken out by the client with the contractors and we are acting as a go between on their behalf, appointing the contractors and mediating over any niggles or disputes regarding the installation.
They are not expected to pay the installers until the job has been fully fitted to their satisfaction. This gives the consumers the confidence to proceed with the deal.
This, we have found, focuses the minds of the installers on firstly, to check everything very carefully for damaged or missing goods and get onto us asap to chase these items up; and secondly it ensures they make that extra effort to do a superb job and thus get paid all the sooner.
Inevitably there is the occasional remedial item we have to order in that takes a few weeks to arrive and in these cases the fitter is usually able to agree a small, say £200 retention, with the client who is otherwise delighted with a job well done.
RFK has by now, of course, long been fully paid up and at worst an awkward client perhaps won’t pay the fitter that final but relatively small outstanding balance in which case we will pay them to ensure their continued loyalty to us.
Fitters like this system as it means they get paid weekly by clients rather than Nett monthly by us.
Clients like it because they are effectively ‘saving’ 20% VAT on the installation by not paying it via RFK and because they feel they have a reasonable retention in hand.
We like it because we get paid promptly and, in the case of those clients who want to argue with us over some non problem, then we can negotiate with them from a position of strength and not weakness as we already have had their money.
As a professional and honourable company this doesn’t mean we take liberties. We always endeavour to do as perfect a job as is humanly possible and will always go that extra mile to ensure our clients total satisfaction and that our reputation is further enhanced as a consequence.
But it does filter out nearly all the nonsense which makes life a lot easier!
I learnt my lesson over 20 years ago when the business was still young and most of our clients were buying kitchens for around £4 – £5,000. We had just taken on Scotwood as our first step upmarket into the world of ‘Bespoke’ kitchens and I had a client who was renovating a big old farmhouse near Warwick.
He loved the product and was happy with our design and price of around £25,000 supply only.
But he wasn’t happy with our terms and so, because it was a very big and prestigious job which I wanted, I broke my own rules and agreed on a 25% retention.
The job went very smoothly and we dovetailed in around the main contractor neatly. Right up until the last week the client, verbally, had been very complementary of quality of the goods and the standard of workmanship, attention to detail and willingness to make minor alterations to his requirements on site including ordering in additional materials.
So imagine my surprise when, out of the blue, I received a letter from him expressing his total dissatisfaction with the job, criticising the installation, the standard of the workmanship and highlighting the ‘poorly designed’ items he had had to ‘haul us over coals’ about resulting in us having to order in replacement goods that ‘should have been correct in the first place’.
He further ranted on that this had led to a totally unacceptable delay in the job getting completed and that the stress of it all had made his wife very ill.
It was all utter tosh of course but when he then came into the showroom to settle up he presented me with a cheque that was reduced by exactly 10% – £2,500, of the total job value.
On the back of the cheque he had written these never forgotten words – “Encashment of this cheque is deemed acceptance of this amount in full and final settlement of the contract between us”.
He coolly explained to me that I had two choices, accept the cheque and call it a day, or take him to court for the whole amount in which case I would almost certainly lose because he had pages of made up notes and the letter he had sent me listing his complaints and that the courts nearly always sided with the consumer!
He was right of course and through gritted teeth I accepted his terms.
I subsequently discovered he had pulled the exact same trick on the builder and had chipped him £25,000!
We have never broken our own rules since and I occasionally remind my staff of this story and tell them to remember:
“All customers are liars, cheats and ba####ds. That way you’ll never be disappointed but occasionally you’ll be pleasantly surprised!”