By David Greenberg, AVP International
Find Out Exactly Who Your Customers Are
Excuse me. What did you say your name was?
It's not unusual for buyers seeking credit to abbreviate or use a partial name rather than the complete name for their company. There are also occasions when a buyer may inadvertently misstate the name of their business. And, worst-case scenario, some may do so in an attempt to commit fraud.
Whatever the case, it’s critical for sellers to be sure they know the correct legal identity of all potential buyers. This name, and the identity number attached to it, should be stated in all sales contracts and invoices.
Be sure to verify the correct name of the buyer before credit is extended. You're shipping goods or providing services that represent your revenue. It's just good business to be clear about specifically with whom your doing business and who will be responsible for payment. And, in the event the buyer defaults, you'll need to provide the precisely correct legal name of the entity as a defendant in any legal action.
To determine the correct legal entity, you must check the company register for the applicable state or country.
Here's an example of how checking the company register would benefit the seller:
In applying for credit, I may refer to my company as “ABC”, when in actuality, my company name is ABC-Amega Inc.
If I presented a credit application or an offer to buy under the name “ABC”, the seller would check the NYS Secretary of State’s website to verify the name. He would find that there is no such company as “ABC”. The seller would then revert to me for clarification of my correct corporate identity. This, then, would be the name used on all documents relating to the sale.
Suppose the seller failed to verify the name I gave for my company? He would not be aware that "ABC" was a common short form for identifying my company, rather than the full legal name. He would have no reason to ask me to provide the full legal name of my company. As a result, he'd draw up documents specifying "ABC" and, in effect, be dealing with a company that did not exist. You can easily see the problems that could develop.
I used a domestic example, but the principle applies to international business as well. In fact, in many countries, even sole proprietorships and partnerships must be registered and receive an identity number. Therefore, verification of the correct legal name of a company is applicable to those entities, and to corporate entities alike.
When it comes to credit sales and collecting information from buyers, such as the company name, the words of President Reagan are worth remembering: "Trust, but verify."
Following is a list of Company Registration websites for a number of different countries: (where URL is more than one line, copy and paste into browser)