Do You Charge Cancellation Fee's?

[MASSEY]

It appears to be happening more and more, people getting quotes for work and cancelling at the last minute, so i'd like to start charging customers who cancel money and chase them for it if.

We had a customer who got trapped in some terms that said if they cancel they still have to pay the whole sum. They cancelled (as the company were doing poor quality work) and paid the sum and then used us instead.

I would like to go for a more modest figure of 30%, which could still amount to a few grand should someone cancel a 10,000 pound kitchen for example, or a 50,000 pound renovation.

The reason i am wanting to do this is because i don't like the idea of resources being expended on customers who are all yes, yes, yes, and change their mind at the last minute.

We had a job recently where the customer changed his mind after him mom and dad got into an argument about costs but we had been able to secure a 500 quid deposit but it isn't always possible to obtain a deposit upfront before any work has commenced, and we like to give people the security of seeing us there and working before they part with cash. And also a cancellation fee would amount to a higher sum than a deposit anyway so i would be more interested in some terms that are legal and can be chased in the courts.

 

[toastking]

It sounds ludicrous on the face of it to charge somebody to break out of a non-contract agreement - this would be my view as a customer.

However if applied with a huge dollop of common sense and some gentle encouragement to suggest that its a good thing for customers overall; then it could be a good idea to do so.

You're problem as far as I see it is a perception thing. You need to encourage people to realise that cancellations cost you money and as such add costs to genuine customers through timewasters taking up your resources.

Clearly recouping 30% would allow you to cover overheads up until a point. Do you get a lot of cancellations? What are the reasons this happens? May be another way to approach the problem.

 

[ITsoldUK]

Rather than a cancellation charge, what about the good old fashioned non-refundable deposit?

HTH

Daren

 

[Sparx]

Rather than a cancellation charge, what about the good old fashioned non-refundable deposit?

HTH

Daren

This...

 

[MASSEY]

I think what i am looking to do i guess is get them to sign a contract with terms that should they cancel before the go ahead or during they still have to pay a large portion of the price.

As i said, its not always easy to secure a deposit upfront as people are wary with their money when it comes to paying tradesmen. And i guess it helps us to win more jobs by accepting cash half way through the job with the rest at the end as opposed to asking for large sums upfront.

We never outlay massively on materials unless we've had a big chunk out of the job anyway.

My main gripe is the people that give the go ahead and then continue to look for a cheaper price then phone up last minute to cancel. It doesn't happen that often but i still want to do something along the lines of them being contractually obliged to pay something, every bit of cash helps...

 

[HeffernanTrading]

Do you mean cancellation of work where you have either ordered materials or started initial work?

Howard

 

[Talay]

I have no problem paying a deposit as by that time I have selected my contractor. If people are unhappy with this, then I suggest they are not committed and still weighing up options.

However, I would trial this before making it a rule. In my opinion, customers being wary of tradesmen is par for the course and largely self inflicted over decades.

 

[andygambles]

You could have a sliding scale cancellation charge like holiday bookings. For example:

5% x months before
10% x weeks before
30% x days before

Do you get customers to sign quotes when they say they want to go ahead? You can enforce it better by saying you can not give a firm date until they sign the quote as you will still plan other work in to the schedule.

 

[Matt1959]

sorry IMO people should retain the right to change their minds right up until purchase of a service or product so long as actual costs have not been incurred by the provider. Any trade that give me paperwork to sign like that wouldnt get an order.....

 

[andygambles]

sorry IMO people should retain the right to change their minds right up until purchase of a service or product so long as actual costs have not been incurred by the provider. Any trade that give me paperwork to sign like that wouldnt get an order.....

And that is what is happening. Purchase is the moment they sign the quote. If the order requires 4 weeks of labour then he is going to schedule that work in. If the customer cancels the day before then how can he pay his labourers for that 4 weeks of no work?

 

[MASSEY]

And that is what is happening. Purchase is the moment they sign the quote. If the order requires 4 weeks of labour then he is going to schedule that work in. If the customer cancels the day before then how can he pay his labourers for that 4 weeks of no work?

This is the idea behind it, yes.

Matt is a prime example of the customers we'd all like to be able to avoid (sorry matt)

I think my best route of doing what i want to do is to put in the footer of the quote which they sign *Terms and conditions apply.

And get some terms and conditions made up that stipulate people who agree to having work done and then change their mind last minute still have to pay 30%, i might even up it to 50%. This should then either deter someone from cancelling, or leave me in a position to claim money off them in court for being time wasting so and so's.

Most people don't read terms and conditions so it shouldn't be off putting to perspective customers.

I want to have harsh terms because i despise time wasters.

 

[andygambles]

Make sure you give them the opportunity to read the terms and conditions. That clause should also be highlighted. When dealing with consumers they have more protection with unfair terms than businesses.

 

[Matt1959]

I'm a prime example of the type of client to be avoided eh what because I wish to retain my right to change my mind? Not that I do I hasten to add and even if I did do I would give plenty of notice.

Hopefully one would make special allowances for the unforeseen over which a client has little control or is it 50% penalty for cancelling and thats it regardless?

I'm not keen even to use a trade that asks for a deposit for labour intensive work as what that is saying to me is that they dont trust me to pay.

Hardly the best start when a trade provider distrusts the client so much...




If that narrows my choice of tradespeople so be it.

 

[patientlady]

Just a thought that if you are asking for signed contracts that the job is not cancelled, then in return, for myself, I would require a signed contract that you start and finish the job, and on time!
From what I have heard these types of contract are not worth the paper they are written on.
As said above, I would think twice about signing an agreement with such a high risk cancellation charge, just out of principal really.
I understand your frustration and think a decent deposit might be the answer

 

[Talay]

And that is what is happening. Purchase is the moment they sign the quote. If the order requires 4 weeks of labour then he is going to schedule that work in. If the customer cancels the day before then how can he pay his labourers for that 4 weeks of no work?

The maths is not that straightforward.

The costing of labour includes not only the price of labour to the company but also the profit made on that labour. You cannot be expected to profit to excess from not contracting.

Additionally, a full charge to the client would suggest that the business takes no risk in this regard and yet it wishes to profit from the labour charges. This is fundamentally wrong in my opinion, where a business and not the consumer should shoulder most of the risk of lack of work.

I think the balance is struck where the client shoulders a financial responsibility which would hurt to walk away from and yet the business is covered only for the immediate period after cancellation.

How this translates into percentage terms is unclear because of the variable percentage of costs associated with purchases and supplies which could be cancelled or returned, bespoke items excluded. My guess is around 20% of the total cost, which is a fair deposit amount, making the deposit non refundable if the client withdraws.

 

[arcon5]

If you are dealing with consumers in many cases, particularly where they cancel well ahead of time (anticipatory breach of contract), all you would be entitled to is your provable losses anyway. A deposit amount is supposed to be a reflection of this. Anything more is at risk of being a penalty.

Although of course this isn't always so straight forward as if they cancel 4 days in to a 7 day project and you have no other work for your employees to mitigate your losses you would have a very strong case in chasing the sum due.

If B2B, n/a

You could though accept cancellations subject to a minimum notice period making your service to that date chargeable, such as surveys etc, thus making it simply a charge for the service provided

 

[PDRD]

Surely you dont start work or buy materials until you have a signed contract? Does this contract not state what cancellation charges would apply?

Sent from my GT-I9305 using UK Business Forums

 

[MASSEY]

I'm a prime example of the type of client to be avoided eh what because I wish to retain my right to change my mind? Not that I do I hasten to add and even if I did do I would give plenty of notice.

Hopefully one would make special allowances for the unforeseen over which a client has little control or is it 50% penalty for cancelling and thats it regardless?

I'm not keen even to use a trade that asks for a deposit for labour intensive work as what that is saying to me is that they dont trust me to pay.

Hardly the best start when a trade provider distrusts the client so much...




If that narrows my choice of tradespeople so be it.

I would make allowances should they die , for instance

I am surprised you aren't prepared to pay even a deposit. What about all the work people do in the build up to your job? The quoting, the time involved, expenses of business in general, allocating space for your job, and you'd like to retain the right to cancel up until the last second? Paying not even a non refundable deposit?

Let's say i had arranged my business diary for your work and you decided to cancel but i couldn't fill the period of time you had cancelled, is it right that i get no money? Should we not, as a business, protect ourselves from this sort of behavior? And as i said, one of my previous customers had to pay the full sum for cancelling the company they had previously.

I think it misleading to suggest it is only a labour intensive job. Time is money...

Just a thought that if you are asking for signed contracts that the job is not cancelled, then in return, for myself, I would require a signed contract that you start and finish the job, and on time!

But contracts for services and contracts for most things in general are geared up to suit the company, not the customer.

The contract would be geared up so that should we not complete on time it doesn't automatically give the customer the right not to pay. How can a business allow for delays with materials? etc etc. This would make your demands unreasonable

Putting that aside i'd never entertain working for a customer on a domestic level that wants the company to sign a contract.

From what I have heard these types of contract are not worth the paper they are written on.
As said above, I would think twice about signing an agreement with such a high risk cancellation charge, just out of principal really.
I understand your frustration and think a decent deposit might be the answer

I hear that most contracts aren't worth the paper they are written on which is why i would compile a contract and get a legal bod to look over it.

The contact on this website will make a good template for my needs i think http://www.fmb.org.uk/find-a-builder/free-contracts/download-contracts/ Domestic Contract for Minor Building Work (Up to £50k)

 

[MASSEY]

The maths is not that straightforward.

The costing of labour includes not only the price of labour to the company but also the profit made on that labour. You cannot be expected to profit to excess from not contracting.

Additionally, a full charge to the client would suggest that the business takes no risk in this regard and yet it wishes to profit from the labour charges. This is fundamentally wrong in my opinion, where a business and not the consumer should shoulder most of the risk of lack of work.

I think the balance is struck where the client shoulders a financial responsibility which would hurt to walk away from and yet the business is covered only for the immediate period after cancellation.

How this translates into percentage terms is unclear because of the variable percentage of costs associated with purchases and supplies which could be cancelled or returned, bespoke items excluded. My guess is around 20% of the total cost, which is a fair deposit amount, making the deposit non refundable if the client withdraws.

You are suggesting that the terms of 100% payable should a cancellation happen is a penalisation and not realistic? You might be right... But i think a 100% fee is not so much a penalisation in an instance when a company loses a business week because of cancelled work.

arcon5 If you are dealing with consumers in many cases, particularly where they cancel well ahead of time (anticipatory breach of contract), all you would be entitled to is your provable losses anyway. A deposit amount is supposed to be a reflection of this. Anything more is at risk of being a penalty.

Although of course this isn't always so straight forward as if they cancel 4 days in to a 7 day project and you have no other work for your employees to mitigate your losses you would have a very strong case in chasing the sum due.

The way i would like to gear it up is so that if they cancel within 7 days before the job is meant to start it still holds the same penalties should they cancel during the course of the job. If you book someone in for work and they cancel just before the go ahead it is just as much of a pain should they change their mind once work has started, it's all lost profit.

 

[MASSEY]

Surely you dont start work or buy materials until you have a signed contract? Does this contract not state what cancellation charges would apply?

Sent from my GT-I9305 using UK Business Forums

We don't really have anything in place at the moment in terms of contracts but we generally get the customer to sign the quote which details what we will do, a rough time scale, and the sum payable / stages for payment. Whether or not that is worth the paper it is printed on i don't know...

We don't buy materials before we have had sums from the customer but my issue is more along the lines of time being money not physical money loss buying materials and then a customer not paying because we ensure that never happens.

 

[Root 66 Woodshop]

Within all of our quotes from work it clearly states that a 50% non-refundable deposit is required prior to ordering of product and that installation commences within x days from ordering.

This has been in place for a few years now, long before I started with the company.

Proportional amount of the service and product that we provide is bespoke made, therefore will not fit other properties. It would be bad business to just allow customers/clients to change their mind a couple of days prior to installation.

With all due respect Matt, you've even stated yourself,

"so long as actual costs have not been incurred by the provider."

- Incurring costs start from the beginning of the initial call to us... My time spent creating quotes, my time attending sites, my time and the businesses money ringing us suppliers and getting quotes from suppliers... even down to sending a hope you received my quotation emails costs the business money....

C'mon you're a businessman surely you understand that?

 

[Homer J Simpson]

If I've done nothing (other than a call or local visit), I won't charge anything. But if I've got a quote signed etc, then depending on the size of the job and how close to starting actual work on site, I charge between £100 & £500 cancellation fee. It's clearly in my t's & c's but I've never had to enforce it yet.