Relationships with your Customers & Clients - Who are you Contracting With?

Posted by Luke Mitchell on 19 May 2016
Relationships with your Customers & Clients - Who are you Contracting With?

One of the most important things a business must know is who they are doing business with.  This sounds like a straight forward matter and that is perhaps why it is so often overlooked.

Typically the first question we ask clients who come to us with a debt recovery matter or a dispute  is "Who owes you the money?" or “Who did you contract with?”. Often the client will have the name of the business or the name of an employee of the business, but cannot readily identify who it is that they have actually contracted with. That is – which legal entity have they entered into a binding contract with.

This means that time, effort and money is spent attempting to work out which entity or individual ultimately owes the money and/or has the liability. In some instances the responsible party cannot be identified with any certainty, rendering the debt unrecoverable or at a the very lease adding significant costs and risk to any legal proceedings which may be commenced.

There is however a straightforward solution to this problem – ensuring that you have appropriate client engagement documents in place which are used each and every time you engage with a client.  Every business should have a Client/Customer details form that at a minimum requires the following information to be provided:

  • Name of entity/business;

  • Type of entity (e.g. company, trust, sole trader, partnership);

  • Name of business owner(s) or trustee;

  • Directors;

  • ABN (and ACN where a company is involved);

  • Trading and postal addresses;

  • Phone and email contact details;

  • Details of the designated contact person;

  • A signature field.

We also recommend that all businesses have a written set of Terms and Conditions of Trade that are provided to customers in conjunction with the Client/Customer details form. Trade with new customers should not begin until the customer has completed, signed and returned the Client/Customer details form.  The information collected on the details form can then be verified relatively easy through ASIC and Australian Business Register searches.

It seems fundamental, but do not underestimate the importance of knowing precisely who it is that you are contracting with from the outset. Doing so can help to avoid bad debts (and the associated time and financial costs) from arising.

We specialise in providing clarity and confidence to business operators in their legal relationships with their customers and clients. If you think your client engagement documents and processes need reviewing – or if you don't have any – contact us before it becomes a real problem for your business.