Building Q&P Confidence in your Future Part 2

Last week, Judy Bell laid out some of the fundamentals of how to engender a sense of confidence in your own business future. This week Dave Bell, (pictured) co-founder of Quote & Print, drills down to some of the nitty gritty to discover what it means in practice.

One of the most important points raised last week was about ‘knowing what your business does best.’

My first question is, ‘what do you mean by best?’

From you own point of view, this would normally mean the jobs generating the most profit. But then you have to ask, des this mean the highest dollar value profit or the highest percentage profit. Assuming that you print jobs with a wide range of values normally you would use percentage profit.

The next question to ask is, how do you define percentage profit? This is not a trivial question because as we travel around the country doing Quote & Print installations, we find that if you asked three printers their definition of profit then you would probably get three different answers. If you then asked an accountant, he would most likely give you a different answer again.

Let’s define the percentage profit as 100 times the difference between the invoiced price and the actual cost of the job divided by the invoice price.

The next thing is to define what is meant by the actual cost of the job. This must always include stock plates and film and any outside work that you may be invoiced for.
The next item is labour. Do you want to cost labour at the rate you pay your employees e.g. $30 per hour, or at the charge-out rate for your presses, or at some other rate?

What about ink or rags or solvents of other cleaning materials?
What about the wire used by your stitcher?
What about the electricity used by the press?

Once you have decided what to include in actual costs, the next decision is how to record it.

In the good old days every body wrote their actual cost down on the back of the job bag. At the end of the month a costing clerk would add them all up. In the really good old days you could do a lot of jobs as do and charge, which means you would add up your actual costs, add your mark-up e.g. 25 per cent then invoice the customer. Otherwise you would write down the actual cost and the estimated price and leave the pile of job bags on your boss’s desk for him to look at.

There are a number of problems with this method. In the first place it takes a long time to do this manually and in these harsh economic times nobody wants to pay $40,000 per year for a costing clerk.

The second, and more important objection is that you have no way of knowing if the figures entered on the job bag are correct. Many staff will simply enter the figures they think the boss wants to see.

They won’t enter in extra stock if there is wastage on the job.

If the job took longer that what they thought it should, they will enter in a guesstimate of how long it should take.

For outside work often there is the problem of ensuring that the entered costs agree with the invoice your accounts department has received.

Finally, there is the problem that if you have a query about a particular entry it might have been made 30 days ago and no one can remember the circumstances.

Go for the genuine reporting method
These issues are best solved by computerizing your cost collection. For employee times you can ensure that the times entered each day add up to the available hours in each day. For outside costs you can use the invoice price. Your stock control system can readily track how much stock, film and plates was charged out to each job. You can check this information on a daily basis and if there are any queries you can easily check and correct them if necessary.

Finally, your computerized system can automatically rank, or order, each job from the most profitable to the least profitable. Or it can work out the average profit per customer and rank your customers.

Of course, there are other useful methods of ranking jobs.
You may use the ratio of labour to material on a job. You may use the net hourly return or the net contribution on each job. You could even refuse to take on jobs under a certain dollar value e.g. $500 or maybe only print four-colour work.

The choice is yours. The role of a good MIS system is to turn all the above data into information so you can make an informed choice.

That’s got to give you more confidence.