FF&E procurement is one of the most lucrative elements of an interior designer's practice. The design of the interiors, the interior architecture and the furniture, fixtures and equipment (FF&E) is only half the job - this all still needs to be purchased, consolidated, delivered to the client, unpacked, assembled, styled, finished and all of the rubbish cleared away.
This process of purchasing, installing and styling is referred to as "FF&E Procurement". This is usually a monumental exercise, with some projects requiring 100's or even 1,000's of items to be selected, ordered, purchased, delivered to a consolidation warehouse, insured and then delivered to the client. The interior designer will need to liaise and co-ordinate with suppliers, manufacturers and retailers to ensure that all of the items are delivered on time and to the required standard and specification.
Of course, interior designers are entitled to charge a fee for this significant piece of work, and tradition dictates that the fee is calculated as a percentage of the value of the FF&E items being purchased.
There are pro's and con's to both. As principal, the designer can generate significant interest on client funds and may not be required to separate client money from their own funds. Conversely, the designer is responsible for everything - this method of procurement is preferable for low risk, high-margin items.
For bespoke, high-risk, or low-margin items, the designer carries significantly more protection purchasing as agent.
Purchasing as "Principal" means the person who sells the items to the client is the interior designer themselves. This will often look like a 'reseller' arrangement, where the interior designer purchases items, adds a mark-up/margin and then re-sells them to the client at a profit.
Purchasing as "Agent" means the interior designer acts as an agent of the client, so although they will often organise the transaction, the two parties to the purchase are the supplier and the client themselves. Any trade discounts or rebates belong to the client automatically, because the interior designer has no legal relationship with the supplier - they are simply the client's agent.
Under Regulation 138 of the Payment Services Regulations 2017, it is a criminal offence for anyone in the United Kingdom to provide a payment service unless the person is an authorised payment institution or a small payment institution. "Payment Services" are defined in the Payment Services Regulations and include the 'execution of payment transactions'.
Most interior designers aren't regulated to hold client money. This means that when they receive client money to make purchases of FF&E on behalf of the client, they may be breaking the law.
Even if they are not breaking the law, the client will wish to ensure that the client money is not mixed with the interior designer's own money - this is because if something happens that causes the designer to become insolvent it could be very difficult to separate out the client's funds from those of the designer.
FF&E suppliers might opt to use a third-party managed FF&E Procurement Account to ensure that client money is always safeguarded and that a clear and transparent record is kept of all of the transactions for the client to see.
By definition, if the designer is supplying FF&E as Principal, then from the moment the client pays the money to the designer it belongs to the designer as a prepayment. This money does not belong to the client anymore - instead, the designer owes the client the furniture, fixtures and equipment that they have agreed to supply.
The British Institute of Interior Design ('BIID') Code of Conduct contains a number of important considerations that interior designers should consider, whether or not they are members of the BIID:
This appears to be really clear - and intuitively so - the interest on client money belongs to the client.
The answer, then, depends:
It is generally be preferable for interior designers to procure as Agent because this avoids them becoming liable for the state/specification/safety of the products they are procuring.
That said, for low-risk, high-value items, or items on which the designer anticipates being able to justify a higher margin (either because they involve a lot of bespoke design or because, say in the example of artwork, they will be worth considerably more once complete), it might be interesting for them to procure as Principal, charging as much upfront as they can reasonably justify, and then placing the advance payments in a zero-risk, high-interest deposit account to earn interest on the money while the procurement is ongoing.
Based on the Bank of England base rate of 5%, our high-interest savings calculator shows that an interior designer could earn £31,260 in a year on £1 million of funds - this amount might be made up as a total of all of the funds for all of the projects they are procuring from time to time - which is enough almost to fund another salary.
