Most people have a special place in their hearts for cold, hard cash. Yet Julian W. Tyler, executive vice president of ProCheck, has a special relationship with checks.
Tyler's good faith in checks is, so to speak, paying off. After three years in operation, his company, a check management, verification and recovery business is growing fast, both in scope and volume.
Tyler does not get bogged down in romance: to him, checks are simply the most cost-effective and convenient payment system available.
And he is no cash basher. He recognizes the appeal of currency, but says that it often obscures considerable costs. Cash must be sorted, stored and supervised, he points out.
"Doing business with cash is the most expensive way (of doing business)," he says. The cost to a business of handling cash, he adds, can be as much as 1%-2% of the total sales by cash. The cost of handling checks, he says, can be narrowed to 1%-2%of the total sales by checks. The fact that nearly 60% of all revenue coming into organizations is in the form of checks, he says, is strong proof of the" convenience of the vehicle.
"The problem with checks is that some of them come back," says Tyler.
What is a problem for retailers and governments and other organizations, however, provides the core of ProCheck's business. The company offers management and consulting services in check handling operations, oversight and accounting, but its central services are check verification and recovery. Tyler explains that there are a small handful of ways that companies can address the problem of returned checks.
One of these is a check guarantee program, not unlike an insurance policy. But these services generally cost 2% of all sales by checks, he says. If a company wants, however, Tyler. says it can decrease the number of returned checks on the front end of transactions, and can increase the number of recoveries of returned checks.
The first of these requires a check verification system. Simply having an in-store system deters a certain number of bad check writers. In one test, ProCheck installed a verification system in 25 stores of a large retailer and saw a 19.5% drop in the number of returned checks after one year. Further, many of the bad checks which are not deterred by this system. are identified before they are accepted. ProCheck sports what Tyler describes as a "closed loop, high precision" verification system. It can include a client's total check receiving history, a database of previous offenders, or both, depending on the needs of each client.
System Provides Quick Verification
This system not only allows for accurate verification within less than 10 seconds, it also can identify likely instances of employee fraud. Clients can easily track whether a cashier has entered the same amount at the register as is on the check. In addition, the closed loop allows ProCheck to return customers to good standing immediately upon settlement of debts.
The possibilities for successful recovery of these debts are as encouraging as that of the verification system, says Tyler. In the same test mentioned above, ProCheck's collection services lowered by 30% both the amount of un-collectable checks and the dollar value of the checks.
In this part of its business, ProCheck cannot rely on the capabilities of computers. Rather it employs sympathy and a bit of what Tyler calls "reverse psychology."
Fallen Angels, Shorts And Bandits
He says that there are three types of people who write checks that are returned: bandits, shorts and fallen angels. Bandits, he explains, purposefully write fraudulent checks – using stolen checks, closed accounts or outright forgeries. This is the smallest group and, despite technological advances in detection systems and the power of court judgments, many of these checks will remain uncollectible.
A larger group, shorts, are people temporarily short of money. They may write bad checks frequently or purposefully, but it is out of mismanagement more than intent to defraud.
The largest group, fallen angels, write bad checks inadvertently, often without the knowledge that they do not have sufficient funds to cover the payment. According to Tyler, ProCheck focuses its efforts on the latter two groups. This is because they will usually make conscientious efforts to repay – and because they will most likely return to retailers as good patrons.
"What these people need is understanding and help," he says.
Many of them are embarrassed about the returned check and concerned about their credit history. Many of them will call upon the first notice from ProCheck.
"If they take the trouble to call in,"says Tyler, "we have a 95% probability they will pay."
"In the collection business, you can not coerce – it does not work," he adds.
He proudly displays letters from people who thank his company for treating them kindly and fairly. Tyler explains that ProCheck's high-speed verification system also benefits patrons by clearing them from the bad-check-writers file instantaneously.
"It allows customers to be returned to good standing very quickly."
For clients, Tyler promises benefits' which can found at the bottom line. ProCheck, he says, helps organizations lower management and handling costs, reducing the number and amounts of returned and uncollectible checks.
Further, clients are much less likely to lose customers in the process of collecting on return checks with ProCheck, he says.
"It cost four times as much to get a new customer as it does to keep them," he explains.
Lastly, unlike many other collection companies, ProCheck makes a policy of crediting its returned check fees to its clients' accounts.
"Returned check fees are intended to go back to the merchants to cover costs," says Tyler. These benefits to patrons and clients have, in turn, led to growth at ProCheck.
"We are growing at about 300% per year," says Tyler.
He cites a 25%-30% increase in the number of checks handled, currently 15,000 per month. Tyler says the company currently has about 120 merchant clients and eight independent sales representatives in that many cities. Looking into the future, Tyler is confident that checks will maintain their importance. The much-touted looming threat of electronic payment systems, he says, are neither looming nor a threat.
"The debit card is not going to take the place of checks in my lifetime. While ATMs are certainly a convenience, we are not going to see the end of checks for a long time."
