Know your customer and avoid being a victim

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Debt recovery

We frequently find that debt collections have been delayed by virtue of paperwork and identity issues. The most common examples we come across include:

invoices addressed to someone other than the contracting party
the contract failing to identify the customer correctly by name, legal status or,
the change in identity of the customer not having been recorded and dealt with at the time.

These issues are often exploited by debtors to delay payment or, to avoid making payment in full.

Training to your internal sales teams regarding “know your customer” is crucial as these are the first point of contact.

It is vital to identify your customer correctly from the outset. Fraud and identity theft is a global issue affecting many businesses on a daily basis.

Following these five tips will help your business to avoid becoming part of that statistic:

Know who your contract is with, it is a:
1. Limited company or PLC;
2. LLP (Limited Liability Partnership);
3. Partnership; or
4. Sole trader or, private individual
Do not be afraid to request sight of documentation, such as:
1. Photographic ID (such as a driving licence or, passport);
2. Utility bills;
3. Certificate of Incorporation
4. Letterhead from the business
Do your research and educate yourself. The internet is an excellent resource for information about businesses.
Be wary of extending credit terms to customers until they have built up a track record of business with you. If credit is essential to the customer, consider getting security in the form of a personal guarantee from someone whose identity, home address and ability to meet the business’s liabilities have all been verified to you.
Keep an eye open for unexpected changes in behaviour from existing customers. Always double check requests to change the delivery or billing address with a known contact at the business. If your customer has consistently placed low volume, low-value orders then find out the reasons for such a sudden dramatic increase in the value of goods being ordered.

If you take these precautions with your customers at the outset and throughout your business relationship, you will improve your chances of collecting payment if that customer becomes a debtor later down the line. Even with the information, this cannot prevent you from ending up with a bad debt but it will be vital information which can be used should you need to enforce a Judgment debt successfully otherwise you could be throwing good money after bad.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

Get in touch

If you have any questions relating to this article or have any outstanding debt issues you would like to discuss, please contact our debt recovery team on [email protected].