June 1, 2004
There are many reasons a company may not hit projected revenues. But one that often gets overlooked is the deadbeat client — a customer who skips out on the bill once products or services have been delivered. Many small business owners might not bother to go after a client who owes, say, $200, because the fees they would pay to a collection agency are too high. And the time it might take to collect could seriously affect their business. But there is a solution.
For less than $7, entrepreneurs and business owners can let deadbeat customers know they’re not taking “no” for an answer. Fidelity Information Corp., a full-service debt-collection agency launched www.olddebts.com in 1999 to allow business owners to collect from customers without paying contingency fees, which can amount to as much as 40% of the bill that is owed. “Going the traditional route on a $500 debt could cost you $250 if the collection agency is successful, or cost you nothing if they are unsuccessful. The alternative is that you can pay $20 or $30 and take a swing at it online yourself,” says Jeff Cronrod, CEO of Fidelity.
Fidelity’s Website is fully automated. The registration is free and once a customer is in the system, he or she can log on at any time and go after debtors. “It’s all done via computer, so the store is always open,” explains Cronrod, who says the collection software costs a little more than $1 million and took 18 months to design.
Fortunately, the user’s fees start at about $6.95, and it only takes about five minutes to file a report. A $16.95 package includes four letters to be sent out to debtors notifying them that you are trying to collect on services previously provided. For additional fees ranging from $12 to $15, olddebts.com will report the debt to the credit bureaus, make follow-up collection telephone calls, and give the business owner online access to the debtor’s credit report. “You can spend as much as $50 if you purchased every option,” says Cronrod, “but the average cost is about $20 per debtor.” You can report as many people as is necessary, and there is a discount rate for reporting multiple accounts at once.
Through this online method, the amounts owed go directly to the lender or business trying to collect, so Fidelity can’t be absolutely sure how much olddebts.com collects. Cronrod estimates their online collection success rate is around 34%.
If olddebts.com doesn’t work, then some clients can turn to Fidelity’s contingency agency or to another traditional collection service for larger debts of, say, $1,000 or more. “Our contingency division is a lot more relentless,” says Cronrod. “We go after them until we get them.” Some methods used at this stage include many more phone calls, court judgments, and garnishing wages.
California-based Fidelity has more than 16,000 customers between its traditional and online collection businesses.
Cronrod began the business in 1992 after a long career as a real estate developer. A large part of Fidelity’s business is