Customer demanding receipts

liberty_lily

Hi all,

Firstly, apologies for the length and thanks for reading!

I'm looking for some advice please for my DH who has been working as a sole trader builder for the past four years (although I should add that due to stress incurred he is about to quit and return to paid employment).

On his current job (replacement wall ties, external insulation and rendering of a detached dormer bungalow), he priced up the materials and submitted a quote for labour (with a detailed description of what that entailed) and materials (not itemised).

The customer (who had come via a recommendation) was happy, verbally agreed to the quote, arranged for DH to order the materials and gave him the money for these. They were subsequently delivered to site by the suppliers. 

A few weeks into the job and the customer asked for receipts for the materials. DH explained that it doesn't work like that - she had agreed to the price quoted and couldn't start querying it now.

Initially the customer seemed to accept this but when the cold snap happened and DH was forced to temporarily stop rendering in case the temperature caused the render to crack, they again began demanding to have sight of the receipts and accused DH of syphoning off money for himself.

She began ranting at DH and she told her B/F to **** off when he tried to intervene.

In addition the customer complained about lack of progress, despite him constantly keeping her in the loop - which is far more than any builder we have ever used has done. 

Relations have since broken down somewhat. DH is in a fragile mental state and is on the verge of seeking medical advice as some years back he attempted suicide when suffering from stress. An impasse has been reached. 

He has been paid for the work completed so far (stage payments), apart from a few hundred £££ the customer has withheld since she began voicing her concerns.

I am extremely worried about DH's state of mind - he has hinted at suicidal thoughts - and will ensure he speaks with his GP asap. He has admitted he is actually scared of this customer and what she might do as her latest communication (via email) is hinting at legal action. 

Any suggestions as to how to proceed would be most welcome please  🙂

macman

Legal action on what basis? He doesn't owe her anything, and she's stopped paying.
I would tell the customer that due to her actions he considers the contract now void and will not be completing it. 
Maybe send an LBA for the remaining payments. Or just write it off as a bad debt if the stress of pursuing a claim is too much?
The receipts are a red herring: he doesn't need to disclose his costs to her or supply receipts for materials.

Doozergirl

So your husband submitted a quote for labour and materials and hasn't deviated from that at all?  

He's done nothing wrong other than stop work for the cold weather (which isn't wrong?) 

Section62

liberty_lily said:

I am extremely worried about DH's state of mind - he has hinted at suicidal thoughts - and will ensure he speaks with his GP asap. He has admitted he is actually scared of this customer and what she might do as her latest communication (via email) is hinting at legal action. 

Any suggestions as to how to proceed would be most welcome please  🙂

The first and most important thing is your DH's mental health and wellbeing.  Prioritise that.  Even if it ultimately means writing off the labour and materials that haven't been paid for so far.

There is nothing wrong with a builder adding a percentage to the cost of materials to cover the admin cost of ordering and paying for them.  This is an industry norm.  Equally, it is normal for a professional builder to adapt the programme to take into account poor weather conditions - the customer would have had valid cause for complaint if your DH had insisted on doing the rendering in adverse weather which resulted in it failing.

The hint at legal action is probably just a scare tactic.  There's nothing in what you've said that suggests the customer has a strong case for legal action - and if they are the type to rant at their partner and tell them to "**** off" then there is a reasonable chance that any legal action they did start may end up with them aggravating the judge so much that they would probably seek any possible way of finding in your OH's favour.

Is there a specific problem with giving the customer a photocopy of the receipts? (not the originals, obviously)

I appreciate your OH doesn't want to do business this way, but if the customer is making a specific request then it may be easier to comply with it, then argue the point about the reasonableness of the amounts charged vs the supplier's charge if that comes up.

I would also consider whether it would be worth putting in writing that your OH finds the customer's behaviour to be threatening and unless they give assurances to stop behaving like that he reserves the right not to complete the job.  That way if the customer attempted to sue for non-completion of the contract, your OH could use this as evidence that they raised the issue in advance of deciding not to go back.  Nobody should be expected to work in an environment where they have to endure physical/verbal/emotional threats - it is a relatively sound justification for refusing to do more work for this client.

Hopefully @Doozergirl will see this thread and give her own suggestions. 
Beat me to it

Gavin83

Is there any reason he can’t supply the receipts? Regardless of who’s right or wrong this surely would have prevented a lot of the later fallout.

I would generally agree with the principle that the quoted price is what was agreed. However I think he’s complicated it by quoting a price for materials and a price for labour. If I was paying say £1000 for some quoted material then I’d expect it to cost near that. If I then found out it had actually cost £250 I’d be cheesed off as I’d see it as them purchasing a cheaper version of that material than the quote suggested.

In terms of the legal action have they hinted what for? I can’t really see she has a case at the moment. Of course if he refuses to carry out any further work she could potentially sue him for some of the costs to get the job finished but such a claim can only put her into the financial position she’d have been in had the work been done. Is he still intending on completing the work?

Doozergirl

Gavin83 said:

Is there any reason he can’t supply the receipts? Regardless of who’s right or wrong this surely would have prevented a lot of the later fallout.

I would generally agree with the principle that the quoted price is what was agreed. However I think he’s complicated it by quoting a price for materials and a price for labour. If I was paying say £1000 for some quoted material then I’d expect it to cost near that. If I then found out it had actually cost £250 I’d be cheesed off as I’d see it as them purchasing a cheaper version of that material than the quote suggested.

As a sole trader, you should invoice for labour and materials separately because they are treated differently for income tax. 

He's still quoting a price that they have accepted.   If they want question it then the time to do that is beforehand. If someone is worried that the contractor has not bought what they quoted for - like Aldi beans instead of Heinz, you'd see the products on site, but if he did want to quote materials at 4x cost, he is still entitled to do so if the customer accepts it.   


I have been asked for a a breakdown recently and I just edited what Xero spits out for me by adding a breakdown of materials in each invoice, not the actual invoices.    There were no further questions.  She'd already tried to pay us twice for the same thing and we'd refused the money.

In the same situation I would: 

Put everything in writing from here.  

Email a spreadsheet of the receipts.  Date, Supplier, rough one line breakdown of items, price *including* markup, VAT (if applicable).  Total it all to show it matching the invoice price. 

On the following day, email the invoice again, marked "Letter Before Action" with a request for payment within 7 days to prevent court action. 

7 days later, get on MCOL (moneyclaim online) and file it with the court as a small claim.  


In addition:  

Make sure I have a decent accounting system like Xero.  Put tracking options on receipts and invoices so you can pull off a profit & loss report at will.  I use it as the basis of my invoice - spit my bills out into excel and then add margin to work out what I need to invoice.  

Also get Dext or Auto Entry.  They allow you to photograph or email your receipts/invoices, store copies into Xero whilst also automating most of the data input. 

Join the Federation of Master Builders.  They have a dispute resolution service plus a legal helpline and letter templates to help with this kind of thing (amongst other things) to support you in these cases.  

Trust your gut with potential customers.  Don't work for them because you think you need to.   This has always paid off for us after learning some swift lessons.  

However: 

I totally agree with Section62 that your husband's mental health takes priority here.    If you can handle this alone, I would.  Can you?  Otherwise I might change the plan.  Can you afford to let it ride for a while?



Fwiw, I had to do the MCOL thing twice when we first started up and had the worst customers.   Both paid up without it going to court.  There are definitely cowboy customers out there too.  

liberty_lily

Thank you all so much for your incredibly helpful and informative replies...it's appreciated hugely!

DH isn't here at the moment, but I'm going to reread all the responses on this thread as well as getting him to read them himself when he's home. Then I'll come back with answers (and most likely more questions!).

But for now, thanks again Doozergirl, Section62, Gavin83 and Macman 🙂

Doozergirl

Both my H and I know how it feels.   It all feels incredibly personal but he's done nothing wrong.  It sounds trite, but all things do pass.   And money doesn't really exist when you close your eyes and experience the moment (though it definitely feels like it most of the time) 🤯 

DullGreyGuy

Doozergirl said:
As a sole trader, you should invoice for labour and materials separately because they are treated differently for income tax. 

Is this some weird building trade thing? How are materials treated differently for income tax @doozergirl? 

Normally for any goods or services you take the price you've charged your customer and minus the costs you've incurred, there isnt a lower rate of income tax for any profit margin you've added to the materials -v- services.

Things are slightly different if you arent doing cash accounting and you're holding stock but not sure how many sole trader builders have a few pallets of board at home ready for the next potential customer. 

Postik

The customer should have purchased the materials themselves if they wanted receipts for them.  If your husband charged x4 times the amount and "syphoned" off the extra that's his business.  It's called making a profit.  It's also his perogative to earn as much as he possibly can, and the customer's perogative to do their due dilligance (before the job starts, not half way through) and get the best deal for themselves.

Doozergirl

DullGreyGuy said:

Doozergirl said:
As a sole trader, you should invoice for labour and materials separately because they are treated differently for income tax. 

Is this some weird building trade thing? How are materials treated differently for income tax @doozergirl? 

Normally for any goods or services you take the price you've charged your customer and minus the costs you've incurred, there isnt a lower rate of income tax for any profit margin you've added to the materials -v- services.

Things are slightly different if you arent doing cash accounting and you're holding stock but not sure how many sole trader builders have a few pallets of board at home ready for the next potential customer. 

It is a weird building trade thing.  Construction Industry Scheme.  If you subcontract you split them out and whoever employs you holds back 20% of the labour charge for His Maj.  

If they are used to that they will split labour and materials as habit.