Dr. Pierre Fauchard Dental Office

Dr. Pierre Fauchard is a successful dentist but is experiencing recurring financial difficulties. For example, Dr. Fauchard 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 6 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 one of them over $200,000 plus interest. In the past, Dr. Fauchard 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 a local consultant for advice.

According to the consultant, the financial difficulties facing Dr. Fauchard have been caused by the absence of proper planning and control. Budgetary control is sorely needed. The following financial information is available for a typical month:

	Average Fee ($)	Quantity
Fillings	$50.00	90
Crowns	$300.00	19
Root canals	$170.00	8
Bridges	$500.00	7
Extractions	$45.00	30
Cleaning	$25.00	108
X-rays	$15.00	150

Costs
Salaries:
Two dental assistants	$1,850.00
Receptionist/bookkeeper	$1,550.00
Hygienist	$1,750.00
Public relations (Mrs. Fauchard)	$1,050.00
Personal salary	$6,500.00
Total salaries		$12,700.00
Benefits		$1,344.00
Building lease		$1,500.00
Dental supplies		$1,150.00
Janitorial		$350.00
Utilities		$450.00
Phone		$100.00
Office supplies		$100.00
Lab fees		$5,000.00
Loan payments		$570.00
Interest payments		$450.00
Miscellaneous		$250.00
Depreciation		$700.00
Total costs		$24,664.00

Benefits include Dr. Fauchard'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 a.m. to 4:00 p.m. and on Friday from 9:00 a.m. to 12:30 p.m. A total of 32 hours are worked each week. Additional hours could be worked, but Dr. Fauchard is reluctant to do so because of other personal endeavors that he enjoys.

Dr. Fauchard has noted that the two dental assistants and receptionist are not fully utilized. He estimates that they are busy about 65 to 70% of the time. His wife spends about 5 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. Fauchard 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).

Required:

1. Prepare a monthly cash budget for Dr. Fauchard. Is there more cash going out or coming in?
2. Using the cash budget prepared in Question 1 and the information given in the case, recommend three actions to solve Dr. Fauchard's financial problems. Prepare a cash budget that reflects these three recommendations and demonstrates to him that the problems can be corrected. Do you think that he will accept your recommendations?