Research your client’s ABN as part of your due diligence as a good business owner. We cannot overemphasize the importance of obtaining ACN and ABN from potential clients—especially if you’re planning to extend them credit. These numbers serve as extra layer of protection against bad debt. They allow you to determine who you’re conducting business with. This, in turn, makes the collection process easier. But to take full advantage of this layer of protection, it’s not enough to simply obtain these numbers. You also need to verify them.
The Case of Misleading ABNs
It is easier to operate under the assumption that your customers will be honest and forthcoming whenever you ask them for information. Unfortunately, this assumption does not always hold.
Let’s take the case of a client Slater Byrne had recently. This Client approached us to help them recover a significant amount of debt. Our team reviewed the details of the debt and found a credit application form with the Debtor‘s ABN.
When followed up on this and did research on the client’s ABN, we discovered that the ABN actually belonged to a trust. We then went back to the Debtor to find out who the trustees were, but they would not tell us. This is where things got complicated.
The Problem with Trusts
In order to take legal action against a trust for debt recovery, we need to know who the actual trustees are. A trust is not considered to be a physical entity as it exists only on paper. We cannot sue something that doesn’t physically exist.
The trustees, on the other hand, are considered physical entities. They can be individuals or companies that are overseeing the trust. Knowing who they are can help us recover a debt.
But the only way for us to find out who the trustees are is to obtain a copy of the trust deed from the people in charge of the trust. Since the Debtor is not prepared to provide this information, our Client ends up in a very difficult situation.
How to Avoid this Dilemma
The best way to avoid this problem is to do further research the client’s ABN and ACN information. Don’t just accept what you’re being told. Ask questions and verify the answers. In Australia, there are ways to lookup an ABN or an ACN. If you are dealing with businesses operating in New Zealand, the equivalent would be the New Zealand Business Number (NZBN).
If you find that the ABN/ACN is belongs to a trust, you need to go back to the people who filled out the credit application form. Then you need to them for a copy of the trust deed.
This document lists who the trustees are and it will be extremely useful come debt recovery time. If the potential client is not prepared to provide a copy of the trust deed, it is best to postpone doing business with them.
We Can Help
If your business is facing a similar problem or if you need more information about verifying your clients’ ABN/ACN, give us a call at 1300 794 290. We would be glad to help!
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.