In a perfect business world, when one party sells a product or service, the buyer pays right away or makes agreed-to payments on schedule until the account is settled. Credit is extended, sales made.
But it’s not a perfect world.
As virtually anyone in business knows, customers and clients do not always pay on time — or at all. As in all of humanity, it takes all kinds, and some kind are hard to get to pay up. Some never do. The seller must devote resources to pursuing the debt, resources better spent on doing what you do well: producing your product or service, serving customers or clients, growing the business.
Enter George Sirtes and his firm, Harper and White. His firm specializes in recovering bad commercial debt that might otherwise go unpaid. The firm has a network of attorneys who pursue the debts on behalf of clients. Meanwhile, Harper and White in many cases may purchase the outstanding debts, giving the client company an immediate return and cash infusion. The client company benefits not only from getting at least a portion of the debt paid but from wasting its time, energy, human power, and money chasing payment. Business gets done.
Sirtes belongs to the Receivables Management Association, which establishes best practices and standards for its 550-company membership and advocates for the industry. He entered the field after a career in pharmaceutical sales. Writer David Hill spoke with Sirtes, who has more than 30 years in the recovery business, and whose firm operates in every state and more than 200 countries.
This interview has been edited for concision and clarity.
What is the service you provide clients?
Harper and White utilizes attorneys who specialize in the collection of commercial debt. If Company A owes Company B money, we will represent Company B as their attorneys and we will contact the debtor, or the person who owes the money, verify the debt, then we’ll have a very soft and unambiguous conversation, which goes something like, “Pay us or we’ll sue you.” It’s very unambiguous and there’s no way to misunderstand that.
How do you make this process less frightening for clients?
Well, we take over everything, from soup to nuts. They don’t have to bother with anything.
We speak with the client, and we try to verify what his needs are, and make a diagnosis. That’s why we offer a free consultation.
Why is it important to have a licensed local attorney in a relevant jurisdiction?
Somebody without a license a law license has no jurisdiction. If a guy is sitting in Yuma, Arizona and the debtor’s in Provo, Utah, he has not a zilch jurisdiction in that location.
But it’s more than simply being there. The debtor who owes our client money probably owes a number of other companies money; why should he pay one over the other? It’s very simple: Because there’s an attorney’s office who more than likely is well acquainted with the debtor. He probably has children playing on the same softball team, so we an induce him into cooperating.
It doesn’t matter where you are in the U.S., I will have somebody that is local to the debtor and can induce him into paying us — or persuade him. I guess that’s the better word.
It’s a simple declarative one-sentence communication: Pay us or we’ll sue you. And that’s a real attention getter, especially when he’s dealing with an attorney whose kids are playing on the same softball team as his or they attend the same church or on the same PTA and they’ve known each other for a while. His standing in the community may be impaired.
It’s persuasiveness, because you’re inducing him to cooperate. It’s a lot better than having some fat old bald guy chomping on the cigar talking to the guy on the phone and threatening to repossess his firstborn. We don’t threaten anybody with anything. We try reason.
Do you set up payment plans or get debtors to pay all at once?
That depends upon the attorneys. Each one of our attorneys is very, very experienced, and when they speak to people they generally know which way the wind blows. So they offer them a couple of payment plans, and whichever one the debtor can adhere to they probably will go with. Plus the debtor will have to sign a confession of debt and a stipulation agreement where he stipulates that he will pay X amount in X amount of time. So it’s not a free for all. There are rules that govern all this.
Many times the attorney and the debtor have had interaction prior to this, and the last time that the debtor encountered my attorney he had to incur fees in addition to paying the debt because he had to retain counsel to defend himself. People tend to see reason fairly quickly and very readily.
As for companies owed money, there might have been some occasion where they were reluctant to extend credit. With us on the scene, they should be totally at ease with doing that, so they will increase their business. They can be assured that they’re gonna get their money.
How often do the lawyers actually go to court?
They try to avoid it. They try to be persuasive and arrange various payment schedules with the debtor. As long as the debtor is paying, you’re resolving the debt. But if you antagonize him and wait for him to get to court and get a lawyer and so forth, that could take ages. We try to avoid that. We try to do it as quickly as possible and as painlessly. Just because the guy’s a debtor doesn’t mean you have to cause him pain.
How does purchasing debt work?
Sometimes we can give a company a cash infusion by either buying some of their debt or by enforcing some of the judgments they have, which will increase the working capital of a company. So working with us will not only infuse more working cash into the system, but we will help them reduce their debt reserves so that money can be put back into working capital.
“Debt portfolio, judgement portfolio.” Why do you make that distinction?
When you are dealing with debt portfolio you have a lot of people to deal with. When you’re dealing with judgements you need to dig up the bones and then you can search for assets and so forth. In other words, when you’re dealing with debt, this is current and a living entity, but when you’re dealing with judgements, it could be a five or 10-year-old judgement. I have to locate the person or the company, see if they’re still around, and if the individual is liable I have to find the person and I have to dig for assets on which to levy upon so I can enforce the judgement.
What’s a broad range of how much selling receivables will cost?
Depends upon the condition of the receivables. Have 14 people tried to collect on them and nobody was able to? Has the debtor closed up shop and moved to Venezuela, or are there any assets in the business or have they liquidated everything? We have to look into this, and that’s the art. This is not a science; it’s an art of determining what you can pay, because you know what your expectations are when you’re buying a portfolio. And the same with judgements.
When I buy debt on the open market, it can be as much as 10 cents (on the dollar), it could be as much as 3 cents, it could be as little as a quarter of one cent. It all depends on the type of debt that I buy or judgement portfolio that I buy.
Harper & White
P.O. Box 158
Ridgewood NJ 07450-01