By Hayley Hitch, a Senior Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
Sometimes it can be difficult to identify who is your actual debtor…is it the company name placed on the application, is it linked to the ABN number on the application, or is it the individual who signed the application…?
One of the biggest mistakes creditors make when attempting to recover a debt is going after the wrong debtor. Although a credit application has been completed in its entirety it may not contain the necessary information to recover a debt from a customer.
To ensure that you are seeking payment from the correct customer, debt collection processes should be put in place to protect you from customers who will default in payment and from whom you will be unable to recover payment..
It is important to firstly ensure that the name of the customer entered on the credit application is correct and complete.
If the customer is a company it is important to cross-reference the details submitted by the company with ASIC records,. Be sure to check the registered address, director’s details, whether the company remains registered, and other relevant information that will assist in conducting a review of the customer’s ability to comply with a credit agreement.
For an individual, it would be beneficial to have a copy of the individual’s driver’s license, or copies of other identification. It is important to also review the ABN information for the business the individual or company is trading under to ensure the ABN remains currently registered and confirm the related individual or company to the business name.
If a credit application is filled in correctly but invoices are made out to an incorrect name, this may make it impossible to recover the debt until new invoices are issued. This will mean that
the new invoices only become due and payable from the date of reissue and therefore allow a customer an extension of time to pay.
It is vital that when reviewing your debt collection processes, measures are put in place to ensure that:
- credit applications are filled in correctly;
- customer details of a credit application are cross-referenced; and
- invoices are addressed to the correct entity/individual for debt collection to occur, if necessary.
Regularly reviewing your terms and conditions should be made part of your debt collection procedures.
If you are unsure if your internal processes are sufficient to verify the identity of a debtor, we can assist to verify the identity of the debtor and review your processes to better assist your debt recovery needs for the future.
Should you require any assistance reviewing your current credit applications, terms and conditions or debt collection processes, please contact our office by contacting Hayley Hitch at hayleyh@matthewsfolbigg.com.au, or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Principals
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
