How does your customers business name effect you?
When you are in business, getting a new customer is a great feeling… You get to grow your income, develop new and potentially long-term relationships and show how well you can do what you do!
However, in the haste to get started, taking a few steps at the beginning are imperative.
Read this article to learn about two of our most important areas to protect what is owed to you when it comes time to involve a Debt Collection Agency…
Firstly, in our industry we are forever talking about Terms & Conditions (T&C’s). Having suitable T&C’S can save you thousands of dollars and having these signed should never be an issue for a customer who intends to complete their part of the arrangement (to pay you).
Secondly, the name! In New Zealand, these are the only types of legal “entities” that you can trade with;
A Limited Liability Company
eg. Orange Bird Limited
- All companies in New Zealand are listed with the Ministry of Business, Innovation and Employment. If you search the Register and the company name your customer gave you is not there, it does not exist.
- All companies in New Zealand have “Limited” on the end. If it doesn’t, it is not a company.
- Look closer – Limited means that liability is limited to the company assets. Make sure your T&C’s include a personal guarantee so if they decide to fold the company (and your chance at getting paid), you can still recover debt from the person who signed the T&C’s as well.
- Make sure that the person who signs your T&C’s is a suitable representative of the company. Are they a Director? Do you have a business card or e-mail trail that proves they are in a position within the company to get credit on behalf of that company?
A Trust
eg. The Orange Bird Trust
- Trusts in New Zealand are not governed in the same way as companies. If someone gives you a name with “Trust” on the end, you have no way of proving it exists.
- T&C’s with a personal guarantee are the only way to go – without this, you could find yourself with no one to pursue and a hard time proving the Trust is real.
A Partnership or Limited Liability Partnership
eg. The Orange Bird Partnership or The Orange Bird LLP
- Once again, partnerships are not governed like companies. If you provide your Debt Collector with a name like this, a phone number, email and address – we have nothing to come back on if your customer chooses to ignore us.
- T&C’s with a personal guarantee are a must. Partnerships have joint and severable liability so having one partner sign is enough to bind the other party.
- LLP’s require the signature of the General Partner on the T&C’s as the partners are limited to the level of investment of the partnership, much like a company. You won’t come across a lot of these.
Individuals/Sole Traders
- Joe Bloggs can choose to trade as “The Orange Bird”. When he calls you and gives this as his name and you put this on your invoice, this can create issues – who do we pursue if there is non-payment?
- New Zealand does not allow a business to simply be a name without Limited, Trust, Partnership, or LLP on the end. There is nothing for us Debt Collectors to chase and we are simply relying on the goodwill of your already non-paying customer to honour payments once we contact them enough times for them to deal with it.
- However, Joe Bloggs T/A The Orange Bird is fine - you need to make sure your invoice states this even if you don’t use T&C’s. Remember - T&C’s are the only thing that will allow you to pass on Debt Collection fees to your customer. Get these signed every time!
Spending some time ensuring that you have the right details and documents from the onset of a new business relationship shows your customer that you value your own time and workmanship as well as giving you the best chance of being paid. Should you find it is time to involve us here at CollectIT, this upfront time could save you thousands as your non-paying customer becomes fully liable for all costs in recovering what is rightfully owed to you.
If you are concerned that you may not be taking down the right details, or you need to review your T&C’s (or even create them), this is a service that we offer at CollectIT. Call us on 0800-WECOLLECT or e-mail info@collectit.co.nz so that we can discuss further. For many of our clients, a review of their T&C’s has cost less that the non-recoverable Collection fees on one unpaid debt.
