Al Moore, owner of Moore Air Conditioning Company, described his efforts to collect from customers who have failed to pay:
In our business, the recourse we have in case of nonpayment is to file a lien on the property. That must be done within 90 days. But it's not worth filing a lien unless the case amounts to $2000, $3000, or $4000. I can tell you right now - for bills on service calls, you are just wasting your time. It costs more than it is worth!
There's a restaurant down at Russellville where we installed a unit. The restaurant owners owe me $3,200. They've never paid one cent, and this account is going into its third year. I finally took them to court. Sued them. Back in March, we got a judgment against them. But they are appealing, and we still don't have any money.
a. What are the implications of these legal problems for credit management at Moore Air Conditioning Company?
b. Is Al Moore correct in arguing that it does not pay to take legal action to collect small accounts? Explain your answer.