The first step in Collections is knowing your customer. And we mean, REALLY knowing your customer.
Collection of any debt starts at the very beginning of the debtor/creditor relationship. Many of you may not think of yourselves as a creditor, but any time you sell a good or provide a service that is not paid via cash or credit card….that is a credit transaction. Any time you invoice for your goods or services, you are extending your customer credit. You are betting that your customer will pay per the agreement you have in place, usually net 10 or 30 days.
Too often only a name and address is obtained…however, have you actually verified this information? For instance, the name “ABC Services” may not have any direct relation to the actual company name. Here are some examples:
- “ABC Services” could be a partial name for the correct business, ABC Services and Construction, LLC. There could be numerous ABC Services. You must know which one is your customer.
- “ABC Services” could be an assumed name for John Doe.
- “ABC Services” could be an assumed name for XYZ, Inc. or worse XYZ, L.P.
And what about that address? Very often 123 Main is nothing more that a private postal mailing center.
Here are some pointers:
- When dealing with an individual, get his/her full name and driver’s license number.
- If you are dealing with a business, get the actual full name and ask what type of business entity they are. A business entity will typically end with “Inc.”, “LLC”, or “LP”.
- “Inc.” indicates a corporation. Find out where it was incorporated and obtain its registered agent and registered address. Never solely rely on a P.O. Box. Always obtain a physical address. If the registered agent is a corporation such as CT Corporate Systems, also get at least one officer’s name and physical address.
- “LLC” indicates a limited liability company. Obtain the same info as a corporation. In this case you also need to ask for the manager’s name and address and its members names and addresses.
- “LP” indicates a limited partnership. Obtain the same information as for the other entities, and also obtain the name and address of the general partner. A general partner of a limited partnership is jointly and severally liable for the debt. Be aware that the general partner is often a corporation or a limited liability company. In that case, obtain the requisite info for that entity.
- Obtain the name and address of a bank reference where they maintain their bank account. Always keep a copy of any checks received from the customer. At “crunch time” in the collection process, you might be able to garnish the bank to collect your debt.
These simple beginning steps will go a long way to help you when your customer doesn’t pay and you have to start the collection process. Being able to give this information to your attorney will save you time and money. If you need assistance in collecting a debt, please keep Murray-Lobb, PLLC in mind.