Assignment Instructions

Suppose you have been asked to advise Dr. Roger Jones, a successful dentist, who has been experiencing recurring financial difficulties. For example, Dr. Jones owns his office building, which he leased to the professional corporation that housed his dental practice. (He owns all shares in the corporation.) After the corporation's failure to pay payroll taxes for the past six months, however, the Internal Revenue Service is threatening to impound the business and sell its assets. Also, the corporation has had difficulty paying its suppliers, owing to one of them over $200,000 plus interest. In the past, Dr. Jones had borrowed money on the equity in either his personal residence or his office building, but he has grown weary of these recurring problems and has hired you as a local consultant for advice.

According to some research, the financial difficulties facing Dr. Jones have been caused by the absence of proper planning and control. Budgetary control is sorely needed. The financial information in this Google workbook(Links to an external site.) (first sheet tab) has been made available to you showing a typical month.

Benefits include Dr. Jones's share of social security and a health insurance premium for all employees. Although all revenues billed in a month are not collected, the cash flowing into the business is approximately equal to the month's billings because of collections from prior months. The office is open Monday through Thursday from 9:00 am to 4:00 pm and on Friday from 9:00 am to 12:30 pm. A total of 32 hours are worked each week. Additional hours could be worked, but Dr. Jones is reluctant to do so because of other personal endeavors that he enjoys.

Dr. Jones has noted that the two dental assistants and receptionists are not fully utilized. He estimates that they are busy about 65-70% of the time. His wife spends about five hours each week on a monthly newsletter that is sent to all patients. She also maintains a birthday list and sends cards to patients on their birthdays.

Dr. Jones recently attended an informational seminar designed to teach dentists how to increase their revenues. An idea from that seminar persuaded him to invest in promotion and public relations (the newsletter and the birthday list).

(This assignment is derived from Case 9-77 at the end of Chapter 9.)

Make a copy of this Google workbook(Links to an external site.) and share it with editing capability with the instructor.

A monthly cash budget for Dr. Jones has been prepared and is shown in this Google workbook(Links to an external site.) (second sheet tab).

• Using the cash budget in the second sheet tab and the information given above and for the revenue/costs given in the first sheet tab, recommend actions to solve Dr. Jones's financial problems.
• Prepare a cash budget that reflects the recommendations and demonstrates to Dr. Jones that the problems can be corrected and a positive cash number at the end of the month achieved. (Prepare the updated cash budget in the third sheet tab or adjacent to the current cash budget in the second sheet tab.)
• Explain whether any of the behavioral principles discussed in Chapter 9 have a role in this type of setting.