oxford — Only 1% of the total number of checks written each year are returned for lack of funds.
But when the total number of checks written annually exceeds 500 to 600 billion, according to the Federal Reserve Bank, 500 million bounced checks can be bad for business.
That is unless your business is Security Check, an Oxford-based collection and verification company founded by two former University of Mississippi business students and long-time friends. If that’s your line of work then get ready to rumble.
William Alias III, 25, and John Lewis, 27, began Security Check modestly enough in Alias’ sister’s dorm room on the Ole Miss campus in 1994 using her computer. Within a year business was good enough to move into a house, purchase their own computer and use one room as an office.
Attending classes in the morning, the two entrepreneurs sold their concept to merchants in the Oxford area in the afternoon and collected bounced checks from 6 to 9 p.m. each evening. Today, the company has more than 32 full-time and 50 part-time employees in Oxford and some 15 sales and service offices throughout 10 Southeastern states. Another 10 to 15 joint venture offices are planned for 1998 in Missouri, Texas, Oklahoma, Tennessee and Florida putting Security Check in nearly 30 states and one of the fastest-growing companies in the check collections business.
Business is growing at a rate of four to five times a year.
So what’s the secret?
“We’ve been really, really lucky to be honest with you,” Alias said.
But any good businessman will tell you: you make your own luck. For Security Check the success can be directly attributed to their methods, Lewis said, where working by phone and letter, Security Check’s collectors are simply “nice-ing” bad check writers into paying-up.
The secret to collecting, Alias said, is having tact and being persistent, patient and understanding rather than aggressive or rude. They take that avenue because for the majority of the people who bounce checks it is not done with malicious intent, he said. The result is a collection rate of between 60% and 80%.
“The key to this is that they have taken care of the customer,” said Alias’ father. “I think that was just part of the way they were raised.”
William Alias Jr., is an Ole Miss graduate whose business background includes being a founder of Icee and Rollins Protective Service. He joined the company a couple of years ago and moved back to Oxford from Atlanta. John’s father is Clarksdale attorney Mike Lewis, the trial lawyer who dreamed up the idea of taking the tobacco companies to court to recoup health care costs.
From his own business experience Alias Jr. said he understands that recovering lost income from bad checks is a pain but it can be done.
“Sixty-five percent of bad checks are not from bad people” but good customers, he said.
The younger Alias said those who write bad checks fall into three categories: for one group it is a “flat out” mistake; For another it is because finances are tight and they are writing checks to “just get through the month”; and the third are just crooks and “nobody can collect from them” except the legal system.
As a result, Alias said Security Check will soon be opening a legal department to pursue that third group.
“Most (collection) companies don’t have enough checks coming in to justify doing that,” he said.
Although he declined to give an exact figure, Alias said Security Check handles “thousands, many thousands,” of checks monthly.
Like every similar company, Security Check makes its money by collecting the service charge allowed by state laws.
In Mississippi that’s $20, but depending on the state, service charges can range from $15 to $30 per check. That’s a $30 service charge on checks that are written, on average, for $25, Alias said, although they’ve collected on checks written for as little as 80 cents.
Another secret to their success has been to target the small to medium-sized retailer, in particular those small business that handle a large volume of checks but for whom collecting is a chore, such as liquor, grocery and convenience stores.
Businesses, in general, don’t like to collect on bad checks, Alias said. Not only is it time consuming but it can also destroy the chances of future business by creating bad blood between business and customer simply because the unlucky or down-on-their-luck customer bounced a $15 check, Alias said. Going through a collection agency helps lessen the blow, he said.
“We serve as the middle man,” he said.
Brent Larson, manager of Larson’s Big Star in Oxford, was one of Security Check’s first customers, said the company has become an invaluable resource for his store and the other four Big Star stores owned by his family.
Larson said as much as 75% of his customers pay with checks and each year he writes off nearly $10,000 attributable to bad checks.
One of the most important things Security Check brought to Larson’s was the verification system for which Larson pays a monthly fee.
Tied into the National Check Network, the verification system can almost immediately tell a cashier if the customer has a history of writing bad checks.
If the check makes it through the system then Security Check begins the process of tracking down the writer by using any information on the check or accessing other data.
Larson, who had never used or even been approached by a check collection company before, said considering the number of bad checks he regularly receives it’s worth it to him if Security Check only collected on half the checks.
“We are just happy to get it,” he said.
Alias said tracking the majority of those who bounce checks isn’t that hard simply because, with the exception of crooks, they aren’t trying to hide. But despite the best technology and sleuthing not every bad check writer can be tracked down.
“We can’t find everybody but we find a lot of them,” he said.