Update your 2014 BHRs today and start estimating better, pricing smarter, and maximizing your profits.

One of the most common questions printing companies ask about their estimating is:
“How often should I update my budgeted hourly cost rates?"

The industry best practice is to update your estimating cost rates at least every 6-12 months or anytime there are notable changes in your expenses, equipment, staffing, or productivity. After a company closes their financial year or creates their annual expense budget is always a good time to update cost rates. Your rates may increase or decrease, depending on what changes have taken place since the last time you updated them.

Considering the industry’s competitive environment, rates that are off just a few dollars can have a substantial impact on whether or not you win orders or make a profit. As a matter of policy, an organization should continually update their rates to maintain a competitive edge and sustain profits.

The major challenges faced by companies that don’t keep their cost rates updated includes:

• Inability to make accurate pricing, sales, and investment decisions
• Overpricing and losing valuable and profitable work, and potentially customers
• Selling orders below costs, resulting in lost profits and deteriorated productivity
• Being misled by inaccurate estimating and costing figures

Read: How inaccurate Budgeted Hourly Cost Rates almost put Quality Printing out of business.


The Cost Rates Advisor budgeted hourly rates software makes it easy for organizations to keep their rates updated.  It gives shops a more accurate picture of their out-of-pocket manufacturing and overhead costs so they can strategically estimate and price jobs. You can import data from spreadsheets, accounting software, and print management MIS software - making setup and updates fast and simple.

Cost Rates Advisor is used and proven by offset, digital, large format, flexographic, screen, and in-plant printing organizations throughout North America. Three tiered pricing starting at just $228 makes it affordable for companies of all sizes.

With Cost Rates Advisor, calculating and updating your estimating cost rates no longer needs to be a time consuming and demanding task. So update your 2014 BHRs today and start estimating better, pricing smarter, increasing revenue, and maximizing your profits.

Try it for FREE now by clicking here www.costratesadvisor.com

About CostRatesAdvisor
CostRatesAdvisor.com was designed by Profectus Inc., industry experts in the printing and packaging industry. It has been engineered based on proven industry best practices used by experts such as the Printing Industries of America (PIA)©, National Association for Printing Leadership (NAPL)©, Specialty Imaging Graphics Association (SGIA)©, and the Financial Accounting Standards Board (FASB)©. The software has built-in "best of breed" formulas, intelligence, and functionality that make it the industry's most superior product for developing budgeted hourly cost rates.
 
About Profectus Inc.
Profectus is a national consultancy that helps printing and packaging organizations improve their business by implementing best business practices and maximizing the value of their information technology investments. The company was founded in 1993 and has contributed to the success of hundreds of printing and packaging organizations throughout the United States and Canada spanning all industry segments.

10 Ways to Financially Improve Your Printing Organization

Financial performance is a major concern of all organizations, whether you’re a 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

Why Profitable Printing Companies Cost Jobs

Studies show that highly profitable printing companies implement job costing practices. Job costing is the processes of tracking the actual cost incurred to produce an order or job and benchmarking it against revenue. Job costs include labor, equipment, overhead, materials, outside services, and other manufacturing costs.

The benefits of job costing are significant. Using job costing will allow you to identify the most and least profitable areas of your business, so that you can focus on the profitable elements, and try to make the less profitable aspects of your business more efficient. It enables you to hone in on the cost performance of individual jobs, products, customers, production equipment, departments, employees, and your overall business.
   
Job Costing with Budgeted Hourly Cost Rates (BHR)
Budgeted hourly cost rates are an important component of establishing a job’s cost. Budgeted hourly cost rates are a best practice used by the printing and packaging industry for over 100 years. A budgeted hourly cost rate is your out-of-pocket cost associated with each piece of production equipment in your shop. Budgeted hourly cost rates are comprised of operator and helper wages, benefits, rent, leases, equipment depreciation, supplies, utilities, insurance, administrative costs, overhead, and other expenses.

The objective of BHRs is to recover 100 percent of your costs with the production equipment and labor hours you bill out (i.e. prepress, platemakers, presses, digital copiers, wide-format printers, cutters, folders, handwork, etc.).
  
Budgeted hourly cost rates software such as CostRatesAdvisor.com helps printing companies calculate their hourly cost rates using industry formulas and best practices.

Record Keeping
There are several approaches for tracking job costs. The simplest and least expensive method for tracking costs is to have employees write their time on the back of a job ticket or a production time card form. Upon completion of each job, multiply the hours worked by the production equipment hourly cost rate and run a total to get the job’s total cost.

A more efficient and accurate method for tracking job costs is putting computers on the shop floor for the employees to record their activities. There are over 50 shop data collection software products on the market to choose from, varying in capabilities, and ranging in price between $199 and $50,000.

Reporting
There are several key detail and summary reports a company should have for analyzing job costs.

An "Estimate verses Actual Report" is the most important job costing report. It compares a job’s estimated costs to actual costs, identifying any cost variances for each phase of a job, the profit earned on the job, and inefficiencies in estimating or production costs. The results will help you to create more accurate and profitable quotes for future jobs; or improve your production processes. An Estimate verses Actual Report will also help ensure that the customer is properly being invoiced for all the work you did.

https://www.printersadvisor.com/

 

A job costing summary report that shows cost variances for a range of jobs by product type is essential for determining your most profitable products (your niche), where you need to improve, and support future pricing decisions on similar products.

A job costing summary report that shows a range of jobs by customer will identify your least and most profitable customers and can be a catalyst for future pricing and markup strategies for individual customers.

Other Benefits
Profitable companies have experience many other benefits of implementing job costing including:

• Forecasting costs and resources necessary to provide particular services or products
• Defining sales and marketing strategies for products
• Measuring and improving the performance the operation
• Support for future equipment investments
• Identifying spoilage and defects to take corrective actions

Job costing provides knowledge that can make your business more profitable and easier to manage. When done well, it separates the profitable companies from those that struggle to make a profit.

 

By: Craig L. Press
President, Profectus, Inc.

 

To try CostRatesAdvisor.com BHR software for FREE or for more information visit our website http://www.costratesadvisor.com/

 

An Easier Way To Establish Equipment Budgeted Hourly Cost Rates

Many of our subscribers have been asking for an easier way to calculate and update their equipment budgeted hourly cost rates. After all, the industry best practice is to update BHRs at least annually.
 
For years our consultancy has used software or spreadsheets to calculate BHRs for our clients. We often have to create “workarounds” in these limited software products to get true results. Spreadsheets are a better option but required a lot of work every time we want to update rates or add another piece of equipment, even with our creative Microsoft Excel formulas and links.
 
Which is why we decided to develop the Cost Rates Advisor budgeted hourly rates software. Cost Rates Advisor was designed based on proven cost accounting principles, best practices, and standards used by the industry experts including the Printing Industries of America (PIA), National Association for Printing Leadership (NAPL), Specialty Imaging Graphics Association (SGIA), and Financial Accounting Standards Board (FASB). The software has built-in "best of breed" formulas, intelligence, and functionality that makes it a superior product for developing hourly cost rates.
 
The innovated design of the Cost Rates Advisor simplifies the entry of data with an intuitive, straight-forward user interface. All of the entry screens, reports, and help screens provide hyperlinks and drill downs directly to the source data.
 
A Data Import Wizard saves users hours of manual data entry by importing income statements, budgets, expenses, payroll information, fixed assets, cost centers, and other data directly into the Cost Rates Advisor database. Import templates and field mapping functionality enables the export of data from accounting or MIS software into Cost Rates Advisor.
 
Interested in learning more? You can try the Cost Rates Advisor for just $59 or $39/month for the yearly plan. There is no obligation and you can cancel any time. http://www.costratesadvisor.com/

Example Cost Rates Advisor Detail BHR Report

Proven Pricing Strategies
Used By Printing Industry Leaders

By Craig L. Press

President, Profectus Inc

Printing Industry Business Consultants

Devising an effective pricing strategy is one of the most critical elements for sustaining a successful printing business. After all, you cannot make a sale without first setting a price.

Nevertheless, most companies give little thought to formulating an appropriate pricing strategy. Many companies utilize simple pricing approaches predominantly to beat the competition, cover costs, and sustain the business.

The industry market leaders tend to implement more innovative pricing strategies that are designed to maximize revenue, cultivate growth, earn higher profits, and generate the highest shareholder value. These price-savvy companies typically apply numerous pricing tactics intended to address distinct short-term and long-term objectives.

The process of setting an adequate price is not an exact science. Here are a few of the many pricing strategies used in the printing industry.

Cost plus Markup Pricing Strategy This is the most common pricing strategy used by our industry. A sell price is determined by forecasting the cost to produce the order using estimating software, spreadsheets, or worksheets, and then a desired or tolerable profit markup is added to the estimated cost. It is often left up to the estimating department to set the price based on the estimated costs.

While cost is an important factor for determining price, this strategy has some serious flaws. Estimators are generally unfamiliar with the marketplace, product demand, perceived value, and the long-term value of winning the customer's business. It often restricts sales, leaves money on the table, and decreases a company's ability to compete and grow. In general, companies depending on a cost plus markup pricing strategy don't become market leaders; they are perpetually the underdogs.

Skimming Pricing A skimming pricing strategy is when a company charges the highest initial price that customers will pay for a new or innovative product that may not be easily assessable from the competition. As the demand of the first customers is satisfied, the company lowers the price to attract another, more price-sensitive segment. Eventually, the price drops as the product matures and competitors offer a similar product or service at lower prices. A good example of Skimming Pricing is when the early adopters of large format printing were able to charge higher prices before large format printing became more available and price competitive.

Gain Market Share Pricing With the gain market share strategy, prices are set low to gain market share against competitors. Lower prices will eat into your profits, but there are good reasons for this approach. A company may lower prices on digital printing orders to get new customers, knowing that later they'll be able to sell these customers other, more profitable services such as long-run offset printing or mailing services, once they get comfortable with your company. You don't make as much early, but you plan to make money later with "back end" sales.

Versioning Pricing
The versioning strategy is a very effective tactic that can be easily implemented. The idea is to quote the customer slightly different versions or alternatives of the product, for less money. For example, you can quote alternative prices for a more economical size, paper, binding, packing, etc. This strategy can also be used for up selling; i.e. only $79 for an additional 2,000 copies.

Versioning is often frowned upon by the estimating department because it creates more for work for them, but it's proven to win more quotes and customers. Taking the additional effort to present the customer with cost-savings alternatives demonstrates your will for their business and improves their trust in future pricing.

Customer Demand Pricing A customer demand pricing strategy is typically driven by an event, a new trend, niche, or the availability of similar products. For example, a company that specializes in political signage can increase prices during the Senate and Presidential elections, when demand is up. After the elections, demand for political signage will decrease and so will prices.

Perceived Value Pricing
Perceived value pricing is the valuation of a company's products or services according to how much the buyer is willing to pay for it. To price based on perceived value, the customer needs to be convinced of the tangible and intangible values they will receive by choosing your company (i.e. capabilities, on-time service, friendly staff, trust, quality, stress-free, ease of doing business, etc.) Some buyers will not take a company seriously if the prices are too low because they often associate low price with low quality or poor service. To price base on perceived value, consider the following questions:

Conclusion These pricing strategies are just a few of the many schemes used by companies. Other strategies include; value added pricing, product line pricing, promotional pricing, psychological pricing, differential pricing, bundle pricing, and volume pricing. To become a market leader, you need to have a good understanding of a number of different strategies and adopt the strategies that best fit your company's short-term and long-term objectives.

To learn more about developing and implementing an effective pricing strategy for your business, attend Craig Press' "Pricing Strategies for the New Economy" seminar:
- March 2, 2012, Graphics of the Americas Expo and Conference, Miami Beach Convention Center Graphics of the Americas Seminars Page

- April 17, 2012, Printing Industry Midwest, Ricoh Print Learning Center, Roseville, MN PIMPricing Strategies for the New Economy Workshop Registration Page

Best Practices for Printing Estimating & Planning Seminar

By: Craig L Press and
The Printing Industry of Minnesota

October 20, 2009

9:00 am - 3:00 pm

Get Your Game On...

Sound estimating and pricing practices are essential to the success of all printing organizations. An estimate that accurately reflects actual costs plays a key role in making intelligent pricing decisions and determining your bottom line. The speed in which you can provide your customers with a price quote reflects your organization's ability to provide prompt service. An estimate is also critical for forecasting materials requirements, labor and equipment resources, production schedules, and costs. All successful print projects start with an accurate time, material, and cost estimate. This course is designed to improve your estimating planning, and pricing process by implementing industry best practices.

What you will learn:

- Best practices for Printing & Estimating & quoting prices

- Request for Estimates

- Feedback reports that can sharpen estimates

- Qualifications and responsibilities of the ultimate estimator

- Planning jobs for production

- Pricing Strategies, value added pricelists

- Improving the quality of information from customers to sales force

- Quotations and price proposals formats that benefit you and your customers

- Estimates as a sales tool verses a production tool

- Using budgeted hourly cost rates and production standards

- Over 100 calculations and formulas for estimating time, materials and costs

- Computerized estimating software and e-commerce

- Estimating prepress, press, digital printing, bindery, paper, ink and other materials

Who Should Attend:

Estimators, sales and customer service representatives, production planners, managers, print buyers, or anyone responsible for estimating, pricing, or planning print projects

Location:

Printing Industry of Minnesota, Inc.
Rosedale Tower

1700 Hwy 36 W Suite 510

Roseville, MN 55113
Phone: 651.789.5500

FAX 651.789.5520

Click here for additional information or to register:
http://www.pimn.org/classes/pim_classes_detail.aspx?id=217

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