Invoice Hint: Do your Homework Before Extending Credit

As a collections attorney, bad invoices drive me crazy. A collection lawsuit is only as good as the paper it’s enforcing, so when invoices have serious defects, it’s hard to do a good job, because the other side has easy defenses.

A common issue is an invoice (or credit application) that doesn’t get the borrower’s name right. For instance, the document doesn’t clearly identify and completely name the party buying goods. As easy as it sounds, this happens all the time, particularly when dealing with corporate entities.

As an example, let’s say your invoice is simply addressed to “Smith Contractors.” Is that an “Inc.,” a “LLC,” or “John Smith d/b/a Smith Contractors”? This is critical in determining who you sue.  Even if the borrower writes down “Smith Contractors, Inc.,” there might not actually be a valid company set up under that name.

Here’s an easy fix:  check out your prospective borrower’s corporate status on the Tennessee Secretary of State website, by using the “Business Information Search.” You should be able to locate any valid corporate entity, and, if you can’t find it, then you should ask more questions about the legal status or name of your borrower.

Trust me, it’s better to ask those questions on the front end, before you extend the credit. If you wait to do this after the account is in default, it is probably too late.