How Many Of You Could Refund A 16K Deposit Check?

Just wondering how many companies doing 1M a year with less than 10 employees could just write a 16K check as a refund?

I would wager very few could.

How realistic is this expectation?

On the flip side, it is a reasonable expectation that your not-customer wants their 16K back ASAP. They might be willing to work something out with you, but I think you need to figure out a backup plan to get their 16K back to them at once if they insist.

What I do at my company is charge for what labor has been applied to that specific job (project management, programming, etc) and a restocking fee, usually 30%, to return the materials ordered.  For us, the restocking fee covers material handling, however much the vendor charges to return, and cost of return shipping.  I think going about it any other way is taking a loss.  There's no winning on a situation like this, but at least you can break even.

I have a wording that states the refund will not be given for anything other than shoddy work.  It becomes their loss if they decide to cancel the project, and its for the same reasons you stated.  If I need to order specific product, sometimes it takes a while to come in.  If the customer decides that they will be cancelling, I shouldn't be held responsible for the product already ordered for the project.

You took $16K in but have only directly expended/committed $1,000 to the project so far?

Purely from a cash flow perspective, if you are not easily able to write a check back for $15,000, it either means you spent the money on a capital improvement (truck, tools), which is unfortunate timing; or that you are making payroll/rent/gas etc with it, which is just unfortunate.

Not judging here, I’m sure we’ve all been in situations where we’re waiting for a deposit check to pay previous expenses.  But, its definitely not where you should be as a normal matter of course.

That said, it’s standard practice to take 30 days to issue a refund, which assumedly would help.

Check your local contracting regulations.

Different states allow you to collect specific deposit amounts and allow you to charge for costs of a cancelled project, which could include expected profit, labor, planning, restocking etc. 

Some industries are regulated differently and you may have exceeded the amount of deposit allowed which would be an issue.

I’d tell them add the cost of your system to the selling price since it is a “fixture” and proceed with install.

Try and get the seller to connect you to the buyer. It's not impossible that they'll want you to install the system anyway, making the seller look good, making the buyer happy, and allowing you to get paid. The buyer might even agree to fold the cost of the system into the price of the building, since it's a fixture, as UD8 points out. Win-win-win.  

I think everybody can walk away a winner here, with a little creativity and goodwill. 

We have all the material on hand. While we probably have not paid for it yet, it's been here for a week or two so Net 30 will be due soon..

We can use some of it on the next couple of projects, but not all of it. I am sure we will use it in the next 2-3 months. Our installs are very similar, as our projects are almost all apartment communities.

Getting them to roll the cameras into the selling price may be an option, but not likely. This community is probably valued at 20-40M. So asking 40,000,000 versus 40,000,032 is like haggling over a used car price because it has fuzzy dice.

I just wanted to see how many smaller integrators could just stroke a 16K refund check.

We are in our 3rd year, and started with nothing but a dream and $2k in credit cards. 2018 we doubled 2017's sales, and in 2019 we are on track to grow another 50% or more.  This happens by reinvesting money into marketing, vehicles, etc. Yes we leverage some of our finances and sometimes we run into minor cash flow issues, but I think a lot of small companies do. Over all I think we are doing well, and my accountant agrees. We just do not plan for  having to write refunds. I never have had this come up.

Definitely some good advise on how to recoup some money. 

We are well under the 1M mark, and if you asked me this question last year I would have been very hard pressed to make it happen. Thankfully this year we have built up our bank account, paid down our debts, and have stayed jam packed busy so yes we could cover that kind of return check... I just hope my answer will be same next year!