How well do you know your customers? Have you done a drive by to verify the physical address? Do you know if they are really a legal entity and who are the primary owners or officers? All of these questions should be answered before you sell to a new customer and should be reviewed on an annual basis.
Businesses open, close, consolidate and combine at the whim of the owners or shareholders and unless you have policies and procedures to periodically verify your customers you could be in for a big surprise. Remember if you are extending credit to you customers, you are now an unsecured creditor. An unsecured creditor doesn’t have to be uninformed. There are many publically available websites with all kinds of information on your customer.
State Business Entity Databases
Each state’s Secretary of State department maintains a database of public businesses that have acquired a business license within the state. Anyone with access to the internet can verify a business via the state database. The database can confirm the customer’s full registered name, headquarters location, type of business, and the status of their business license. All state business search databases provide this baseline information, but many states allow you to use the database to obtain records and reports associated with a business.
The benefits of searching the state business databases are most applicable to the credit department. The state databases can be used to verify a business before entering them into the customer master file. Is the address given by the customer the same as listed in the database? If not, you should ask the customer why. The databases can also verify the ownership of the customer. This will help reduce fraud and can help in collection efforts by giving the location of other branches and headquarters.
Finding the databases are easy, just search for the specific state secretary of state.