You do business with a customer for a number of years. The customer’s checks are always good and the customer always pays within terms. You have no credit application, no personal guaranty and you do not retain a copy of the customer’s checks when presented for payment.

The customer becomes delinquent and you turn the account over to your collection agency. The account ends up in the hands of an attorney and the attorney asks you for the name of the legal entity that you were doing business with. The attorney asks you if you had a credit application, a personal guaranty or even a copy of the customer’s check. The answer is no.

How often does this happen in your company?

In a time of economic uncertainty and continuing changes in the way we do business, the need to knowing who your customer is, is as significant as ever.

Whether you do business by telephone, by mail or by the internet, it is clearly important that you know who you are doing business with. Is the customer a corporation, a partnership, a limited liability company or a sole proprietor? Is there a guarantor you can look to for payment if the customer is out of business?

If you do not use a credit application and a personal guaranty, you should consult with your attorney in regard to developing such documents. If you do not maintain copies of incoming payments from your customers, you should consider this procedure as it is extremely useful to have the name of the customer’s bank when it comes time for your attorney to collect a debt from that customer.

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Robert O. Wilhelm is a member of the law firm of Wilhelm & Wildgoose, LLP of Albany, New York. He is a member of the Commercial Law League of America and has been an attorney collecting commercial debt for more than 25 years.

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