Obtaining ACN and ABN to Improve Your Debt Recovery Efforts

What is an ACN or ABN number? Doing business needs simple due diligence, including obtaining ACN or ABN from your clients. Imagine dealing with a company for several years. You noticed that in recent months this company has increasingly delayed its payments. Until the company totally stopped making payments. You hired a professional debt collection company to pursue the bad debt. Only for the debt collector to find that the company you were dealing with has stopped operations. Worse, the company is in liquidation.

The Importance of Obtaining an ACN/ABN from Your Clients

Both the ACN (Australian Company Number) and the ABN (Australian Business Number) are crucial pieces of information you need from clients. Knowing both numbers will 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.

What is ACN number?

The Australian Securities and Investments Commission (ASIC) issues the ACN number, a unique 9-digit number, during business registration to a business that is registered as a company. The ACN serves as an identifier that lets the ASIC monitor company activities. The number also allows the public to determine an ACN business’s structure.

What is ABN number?

The ABN is similar to the ACN in the sense that it is used as an identifier for businesses, including a sole trader, in Australia. But what are their differences between an ABN and an ACN? They are are as follows:

  • ABN is a unique 11-digit number.
  • The Australian Tax Office (ATO) issues the number to businesses who apply for an ABN to monitor their activity and taxes.
  • The ATO requires all businesses in operating in Australia to have an ABN. Not all businesses need to have an ACN.

How Your Client’s ACN/ABN Helps Debt Recovery

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.

Here’s an example:

XYZ Pty Ltd engages Slater Byrne Recoveries to recover overdue invoices. The debtor, Crown X Australia Pty Limited, has an annual turnover of $1million and a good reputation in their industry.

However, when SBR contacts the debtor, they told us 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 listed our client 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. However, our client does has any real proof that they were the entity that engaged our client in the first place.

We featured a case study on the importance of obtaining an ACN or ABN from a client prior to conducting business. While the company already obtained the ABN from the client, it turned out that the ABN belonged to a trust.

Slater Byrne Recoveries encourages you to obtain an ACN/ABN from your client company in Australia. You can do this via a credit application or your Terms and Conditions. We also encourage you to get the NZBN (New Zealand Business Number) if you are doing dealing with New Zealand businesses. Or you can do your own due diligence and do an ABN lookup or an ACN lookup. You might need the help of professionals to do this.

For Questions, Contact Us!

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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