Both the ACN and the ABN are crucial pieces of information you need from clients to facilitate a smoother and more successful debt collection process. But before we delve deeper into the reasons behind this, let’s first understand the difference between these two numbers.
An Australian Company Number (ACN) is a unique 9-digit number that is issued by the Australian Securities and Investments Commission (ASIC) to a business that is registered as a company. The ACN serves as an identifier that lets the ASIC monitor company activities and allows the public to determine a business’s structure.
The Australian Business Number (ABN) is similar to the ACN in the sense that it is used as an identifier for businesses in Australia, but there are some key differences:
An ACN/ABN allows you to determine exactly who you’re doing business with. This saves you from a whole lot of trouble come debt collection time.
We’ve dealt with many clients here at Slater Byrne who do not obtain an ACN/ABN from their customers. This mistake leads to grave difficulties down the line as many companies have similar names.
Then there are companies that have many similar entities under them and those entities also try to engage our clients. This understandably creates confusion and our clients end up not entirely sure who owes them money.
XYZ Pty Ltd engages Slater Byrne Recoveries to recover overdue invoices. The debtor is a company called Crown X Australia Pty Limited with annual turnover of $1million and a good reputation in their industry.
But when we contact the debtor, we are told that it is in fact Crown X1 Australia Pty Limited that owe our client the funds. Both companies have the same directors, but here’s the catch—Crown X1 Australia Pty Limited is a much smaller company and is now in liquidation.
Crown X1 Australia Pty Limited enters liquidation and our client is listed as a creditor. Since there is no proof that the debt was incurred by any specific entity, our client will likely not get paid.
The only alternative for our client is to initiate legal proceedings against Crown X Australia Pty Limited without any real proof that they were the entity that engaged our client in the first place.
You can avoid all of this by obtaining an ACN/ABN from your client as soon as you are engaged. You can do this via a credit application or your Terms and Conditions.
If you’d like to know more about how to effectively deal with bad debt, give us a call at 1300 794 290.
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