Friday, November 22, 2013
commercial, packaging, digital, large format, or in-plant printing operation. Here are 10 ways you can improve the financial performance of your organization.
1. Improve Administrative Processes
Implement lean principles in your administrative areas to eliminate unnecessary and redundant non-value-added activities, steps, and handoffs in your sales, estimating, order entry, purchasing, invoicing, and accounting workflow. Put a team together to define the steps required to get jobs through your administrative processes and design a more efficient "Lean" workflow.
2. Implement Industry Best Practices
Best practices are proven methods in which printing organizations have achieved top performance and serve as goals for other companies that are striving for excellence. Why reinvent the wheel? Improve your financial performance by adapting these accepted best practices to your specific needs.
3. Speed Up Throughput And Delivery
Write up orders accurately and effectively, and then use the quickest means available to produce and deliver products to customers. Unnecessary delays can add days or weeks to customer payments. You must pay out considerable costs in paper, wages, and other expenses to produce orders, so you want to get reimbursed as soon as possible.
4. Leverage Technology
The proper use of technology will improve the synergy of your organization and help it run more efficiently and effectively. An integrated management information system (MIS) like Avanti, EFI Monarch, EPMS, ePace, Radius, or Printers Software is a critical tool for managing and operating a financially sound printing organization. A typical MIS incudes estimating, order entry, inventory management, shop floor data collection, scheduling, job costing, and accounting. Implementing an ecommerce solution can eliminate time and costs associated with processing orders, speed your order to cash cycle, minimize inventory, and enhance relationships among customers and suppliers.
5. Keep A Tight Control On Inventory
Paper accounts for approximately 1/3 of your costs, so less cash tied up in inventory generally means better cash flow. While some suppliers offer deeper discounts on volume purchases, if inventory sits on the floor too long, it ties up money that could be put to better use elsewhere. Implement Just-in-time (JIT) inventory practices to reduce in-process inventory. You should not have items sitting in your inventory if it can be replenished before a job goes to press.
6. Review and Reduce Expenses
Take a hard look at all of your expenses. Consider ways to decrease operating costs, but be careful not to cut costs that could impede performance or profits. Reduce production expenses by scheduling better, reconfiguring work shifts, improving job planning, and eliminating spoilage. If you haven't already done so, implement Lean Office and Lean Manufacturing principles.
7. Know Your True Costs
Having a clear understanding of your costs is essential for producing accurate estimates, pricing orders, measuring job costs and profitability, and generating accurate accounting reports. Good job costing and shop floor data collection software can help to make sure that all of your labor and material costs are fully accounted for and absorbed in your estimating cost rates and pricing.
8. Invoice Customers Promptly
A customer cannot pay an invoice until they received it, so the faster you get the invoice to the customer, the faster you’ll get paid. When possible, send an invoice within 1 to 2 days after the order has shipped. A best practice is to establish the invoice amount when the order arrives and as the customer requests changes. The only exception is billable overs and shipping charges. Many companies are expediting the invoicing process by sending PDF invoices to customers using email.
9. Measure Your Performance
If you don’t measure it, you can’t improve it. If you don’t measure it, you can’t manage it. Time after time studies have found a strong correlation between a company's financial performance and effective goal setting. There are various tools for measuring performance including Performance Benchmarks, Key Performance Indicators (KPI’s), Balance Score Cards (BSC), and dashboards. Metrics can assess the health of your organization’s financial, production, cost, quality, and customer service performance.
10. Utilize Your Employees Better
The need to effectively leverage the skills of employees is critical to improving your financial performance. You may have some people that have evolved into the wrong position over time. Or employees that are overloaded with work while others do not have enough to keep them busy. Take a close look at the skill set and workloads of your staff. Make sure employees are in the position that is best leveraging their capabilities.
If you're interested in learning how Profectus Printing Industry Business Consultants can improve your organization, contact Profectus for a FREE phone consultation at 1-888-868-8662. Or visit our website: www.profectus.com
Cost Rates Advisor Budgeted Hourly Rates Software
Friday, November 15, 2013
Case Study - "We learned our lesson the hard way."
An essential tool for being a successful printing or packaging organization is budgeted hourly rates (BHRs). Inaccurate BHRs can put an organization at risk by making them less competitive, less profitable, and less productive as Quality Printing found out in the following case study:
Quality Printing* is a digital and offset printing company with 45 employees located in the Midwest United States. Quality Printing purchased a new Management Information System 3 years ago. Budgeted hourly cost rates were indiscriminately created in order to implement the estimating and job costing software.
For 3 years, Quality Printing continued to produce estimates and job cost reports using the original BHRs with minor changes. When they finally updated their rates using Cost Rates Advisor, they found that their old rates had significantly impaired revenue, profit margins, and growth. Quality Printing had unintentionally been deceived by the estimating figures used for pricing, and the job cost figures used to measure job profitability. Below is a summary of their findings:
Using their old BHRs, smaller jobs were being under-estimated by 4.2%. Unknowingly, Quality Printing was selling smaller, short-run work below their cost. This was causing the organization to drift towards smaller, less profitable work, which required more administrative costs and machine setups to produce orders, and ultimately lowered the organization's profits and efficiencies.
Quality Printing also found that larger, more expensive jobs were being over-estimated by 10.2%. The old rates caused Quality Printing to overprice and lose a substantial number of higher priced, more profitable quotes over the years. This also caused excess capacity and lower levels of productivity in the shop.
"The BHRs we calculated by Cost Rates Advisor has provided insight to our real costs. We have more faith in our estimates, which has helped us shrewdly price jobs, be more competitive on profitable work, and shy away from less desirable work. We're now processing less orders, but at much higher profit margins. We learned our lesson the hard way. Now we update our BHRs at least annually!" - John, President
If Quality Printing had not updated their BHRs with Cost Rates Advisor, they would have continued to lose profits and would have eventually gone out of business.