CASH IS KING

By Mark Porter

Controlling your cash is vital in todays economy but you are probably also under staffed and over worked - a perfect combination that can lead to missing items that can greatly effect your cash flow.

Therefore it is vital that you have the check and balances built into your operations that will help avoid bad customers, missed charges, paying too much to vendors and maintaining cash flow.

We are not going to look at this topic from the accounting side. We will assume that everyone has an accounting system such as Quickbooks or Peachtree etc and is watching their aging process (the accounts not themselves). We will deal with the management side in this Blog.

Avoid Bad Customers

Chargeable Changes

Start Your Aging As Soon As Possible

Don't Miss Any Jobs (Shipped Not Invoiced)

Don't Over Pay Suppliers

Other Production Tips

Avoid Bad Customers: Debt from one Bad Customer can wipe out profit from a lot of Good Jobs so it is vital that you stay on top of COD and delinquent customers. These days this information can be continually changing and it is important that everyone is aware of a customer's status. There is nothing worse then shipping a job to a customer on COD before getting the money or calling a customer to tell them you are holding their job back only to find out they sent you a check earlier.

Allowing Management to make credit decisions on customers and to convey that decision immediately to other staff is very important. Management can simply flag a customer as COD or On Hold and immediately order entry people cannot open orders without a security password and shipping people cannot create packing slips without a security password.


Chargeable Changes: Profit margins on jobs are so thin these days that any extra work can turn a job from money maker to money loser. It is vital that you track your chargeable changes and collect them from your customer. Implement a system that will document all changes made to the order from the time you agree to do the job until you ship that job to the customer. The changes should be Date / Time / Employee and Reason stamped. Change Orders should be sent and immediately email notification to the customers of the changes. These changes should be immediately reflected on the invoice but allow for changes at that time.

If you keep record of every change and document the reasons for the changes you will collect your legitimate extra fees.

Start Your Aging As Soon As Possible: We all know that customers are going to take their time paying you whether that is 30, 60, 90, 120 days so the sooner you can start the clock the better. When you generate your physical invoice automatically email a pdf copy of it to your customer at the same time. This avoids any delay in mailing invoices and allows you to collect your money days earlier.

Customers will want your invoice asap so that they can bill their customers and keep their cash flow going. You may not get your money any sooner but you will become a more desirable vendor for them.

Don't Miss Any Jobs: Reduced staffs and hurried work schedules can lead to people doing things they forget about. Maybe a job is shipped and then your plant manager pulls the Job Bag to write something on it and then forgets to but it back in the billing file. Or maybe the job bag fell behind the shippers desk. The end result is a shipped job that isn't billed at all or billed at a much later date when it is found which is uncomfortable and embarrassing.

Run reports each Friday that provide a list of jobs shipped but not invoiced. Don't let any hard earned money slip through your fingers.

Don't Over Pay Purchases: Everyone makes mistakes including suppliers but you shouldn't have to pay for their mistakes. By issuing POs, recording receipts and entering Vendor Invoices you can be instantly flagged when the invoice price varies from the PO and the Quantity billed exceeds the Quantity received. You work hard for your money don't give it away to suppliers.

Customer Profiling Leads to Customer Profits

By Mark Porter

It has always been important to treat every customer as if they are your best customer. These days it is even more important that all customers are handled with the greatest of care.


There is no room for error because there is always another company down the street willing to pounce on your mistakes.


Great customer service does many good things


1. Avoid embarrassing Mistakes that lose Customers


2. Avoid re-doing work that costs you money


3. Avoid Production Delays that cost money and miss deadlines


4. Fends off competition that is willing to do a job for slightly less than your price.


The problem is that part of great customer service is knowing all the different details on how a customer likes to operate. What we call the Customer Profile.


This is often a knowledge base accumulated in a CSR or owner's head that cannot be easily dispersed to other members of your staff.


Samples of this type of information are:


Must have PO to Start Job


Must provide 2 samples to President


No Deliveries after 5pm, must use their truck


Dies for Bobst Press must use 3pt rule, Birch Board, Red Rhino Rubber


Never more than 35lbs per carton


Always Wrap skids


By making this knowledge base accessible to all staff members it means that Good Customer Service is not dependant on the availability of one person.


When a database of this knowledge or Customer Profile is accumulated it can be accessed by:


Estimating - Ensuring they have all details at the beginning of the estimate avoids embarrassing extra charges or worse additional costs you can't get back when the job is produced.


Order Entry - Access to the Customer Profile when a job is opened ensures production has a solid foundation to produce a profitable job. Changes to jobs once production begins leads to costs, production delays and missed deadlines.


Production - Production Employee access to the Customer Profile allows staff to make educated decisions on situations that occur in non office hours or when the CSR or owner are not available.


Administration - Office Staff can work with clients in terms of samples, deliveries invoices etc exactly as the customer demands.


Sales - Your knowledge base of customers can be a sales tool to gain more customers. When you do your plant tours and show prospects the equipment and employees that will produce their jobs, show a sample of the knowledge base and help support your claims of quality and customer service.


Companies find the Customer Profiling so important that the knowledge base is employee and date stamped whenever a change is made to it. This provides complete accountability to your customer service process.


Accumulating Customer Profile Information and making it accessible throughout your company leads to accumulating Customer Profits.

KNOWING WHATS NOT HAPPENING IS IMPORTANT TOO

By Mark Porter

Information is obviously very valuable because it identifies what is happening in your business.

For example how many estimates did you do last month. What did it cost you to run that job. How much revenue was generated by different job types. etc.

But Information can also provide tremendous value by telling you what is not happening in your business.

We often call these Exception Reports. They identify things that didn't or aren't happening in your company and this can be invaluable information.

Lets look at some examples.

What if every Friday afternoon you could get a list of all jobs shipped last week but not billed. This information can be determined very quickly and avoids the potential situation of losing revenue or the embarassement of billing a customer much later when the mistake is evetually discovered.

You can also avoid the even more embarrassing situation of Jobs Billed but Not Shipped.

Another example of identifying things that are not happening in your business can be in the area of No Recent Estimates or No Recent jobs.

You can identify when a customer is starting to move his business to another supplier. The sooner your company can identify this trend the greater your chance of correcting the situation and gaining back the customer's confidence and revenue.

It is great to know what jobs were shipped today but it is just as important to know which jobs were scheduled to be shipped to day and weren't.

Won/Loss Estimate Reports not only tell you the customers and job types you are doing well with but also identify customers and job types that are fading and again allowing you to identify that trend as soon as possible so that you can take corrective action.

It is always good to know what goods you received today but it is tremendous value to know as soon as possible which goods didn't show up. Goods that didn't arrive on time threaten delivery times and throw off production schedules.

Knowing which employees on the first shift clocked in can be useful but the real value is identifying how many and which employees didn't clock in so that you can adjust the production schedule accordingly or call in more help.

It is great to know which dies were used but it is also good to know which dies have not been used in the last 2 years so that they can be destroyed or sent back to the customer.

So we can see that Information can bring tremendous benefits by telling you what is happening in your business but it can also bring tremendous benefit by telling you what is not happening in your business

Greater Focus Leads to Greater Profits

By Mark Porter

I was reading an old article on the history of Estimating Software in the Printing Industry and found a very interesting fact that could benefit the Finishing/Binding and Diemaking Industries.

According to the NAQP (National Association of Quick Printers) in 2007 on average companies using estimating software reported $47,000 more in owner's compensation then those using manual estimating systems.

The estimating software forced the owners to look at their true costs of producing different jobs and this allowed them to identify and focus on the type of work they did most profitably.

I think this lesson can be applied to any job oriented manufacturing business whether it is printing, finishing, binding or diemaking.

The more you can focus your efforts and production resources on specific products the more profitable your business will be.

If you were to make a graph of all jobs you did in a given year and make the verticle bar PROFIT and the horizontal bar JOBS and then place a dot on the graph for each job based on its profitability.

The dots above the horizontal line would be profitable the ones below would be not. We must minimize the types of jobs that fall below the line and maximize the type of jobs that appear above the line.

By identifying what distinguished the most profitable jobs the companies could try to replicate those conditions to get more and more of their jobs into this category.

Estimating not only helps you identify your true costs but it also allows you to analyze estimates to ensure you maintain your market advantages in the profitable products.

Won/Loss reports based on product type helps you monitor your valued markets against potential competition.

Won/Loss based on customers allow you to ensure that customers are staying happy with your service.

Daily listings of estimates to follow up ensures you don't lose any of your high profit jobs for stupid reasons.

Estimate listings by salesreps ensure that they are chasing the profitable work.

When I look at our customers the most successful ones are allways the ones with specific markets and product niches.

One of the most impressive things I have heard in an estimating department is "NO BID" because the quote did not fall into their desired product mix.

Profitability Begins with the Quote

By Mark Porter

Communications with a customer is vital to the success and profitability of any job and that communications begins before you get the job and even before you get the PO. Communication for the success of a job begins with the estimate.

The communication from the customer regarding the specifications of the job starts the process and is obviously very important but the key interaction between you and your customer, that often determines the success of a job, is your presentation of the quote.

I have seen many methods of presenting prices to customers that range from simply writing the price on the original specifications received from the customer and faxing it back to very detailed letters with bold and underlined references.

The reality is that the more detail the better. Any room for misunderstanding can be interpeted by customers intentially or unintentially in a manner that results in a damaged relationship with your customer and/or you spending more money on the job then you intended.

A good quote will

1. Present a Professional Image

A good quote should present a professional image to your customer. A price scribbled on a fax not only reflects negatively on the quality standards of your company but can also provide second thoughts to your customer on large jobs.
The print/packaging estimator has to consider his accountability should this job go wrong. I price scribbled on paper will not put him in good standing to his boss when he tries to justify his decisions. Nor will it invoke confidence to entrust your company with a valuable project.

2. Clearly define the job you are providing

A good quote will clearly define the components of the job. The number of pages, bind type, fold/glue configuration, color of foil, type of rule etc. There should be no misunderstanding of the exact product you are delivering.

3. Clearly define the services you are providing

A good quote will clearly define the services you are providing for the cost presented. This is very important as it will provide an opportunity to requote if you mis understood the job and included or left out certain processes.

4. Clearly State What is expected from Customer

The quote should also clearly state what is expected from the customer. If you are assuming that the customer is providing certain materials and providing those materials in certain ways by placing this information on the quote the customer can confirm or deny those assumptions before the job begins.5. Allow for Special Instructions

Your quote should contain any special instructions or requirements you have for certain jobs. Ideally these instructions should be initiated when certain processes are selected from the estimate, allow you to pick from a list of common special instructions and type in specific instructions for unique jobs.

6. Present Pricing as Requested

Don't make your customer work to get the pricing he wants. If he wants certain processes broken out or he wants an each price instead of per M you should provide the quotation in that format.

7. Original Date

Clearly indicate the date this quote was origianlly provided so that your 30/60 day validation period cannot be extended.

8. The Quote should be Generated Automatically

Taking time to rewrite the estimate numbers into a format to present to the customer takes valuable time and represents potential errors from transposition and ommission mistakes. The quote should be automatically generated from the estimate.

9. Deliver Quote in Requested Format

If your customer want their quotes emailed and you fax it you are starting the process in a negative manner. Your quotes should be deliverable quickly and easily in the manner specific to each customer.

10. Track Quotes for Follow up and Analysis

Track desirable quotes to ensure you don't lose them for stupid reasons like " we gave you a big job 2 days ago we didn't think you could handle this as well", " we didn't think you could perform that process" or " I seem to have lost your quote".
Analyze estimates for won/loss, customer activity and much more valuable information

More Accurate Estimating Standards Lead to Greater Profits

By Mark Porter

Often standards that are used in post press industry estimating are developed for the sake of expediency. It is vital that customers get their quotes quickly and therefore in order to meet that need owners and estimators have taken their knowledge and condensed it into simplier factors.

This is seen in many processes when standards such as $3 per M are applied or if the cost for running the process includes material. An example is laminating where say the cost of $125 per M includes the laminate.

This may get the price to your customer quickly but does it maximize your chances of making money on the job or minimize your risk of losing the job because your price is too high.
If your method of estimating does not allow you to take into account different conditions and materials then you maybe getting the pricing to your customer quickly but you are greatly reducing your chances of maximizing your profits.

Let's look at a couple of examples to see how changes in conditions or materials can dramatically change the price of a quote.

In a previous issue we talked about estimating cutting and we used the example of cutting sheets of 60lb and 100lb paper.

Lets say that we had settled on a price of $12 per M sheets cut because we didn't have time to look up calipers, calculates sheets per lift, number of cuts etc. On our 5000 sheets cut 2 out we would have gotten 5 x $12 per M or $60. As per our example though the 60lb stock would have cacluated to $50 and the 100lb stock would have been $75. This is a $10 to $15 dollar swing on 5000 or a $100 to $150 swing on 50000. The variances get greater with thicker and thinner stocks and based on the number of peces cut out.

Lets look at a laminating example where material is included in the running price. On a 10000 sheet run of a 19x25 sheet at $125 per M we would calculate $1250.

But the laminate material could vary from 1.2mil Gloss Polyproplene at $.065 per MSI to 1.2mil Matte Polyester at $.300 per MSI. The cost difference is significant.

If we say the labor cost is 10000 shts / 2000 speed = 5 hours x $100 / hr that is $500 in labor plus our material cost for 1.2mil gloss polyproplene is $309 (19x25x10000/1000x$.065) and the 1.2mil matte polyester is $1425 (19x25x10000/1000x$.300).

This now gives us a swing of $1250 - $ 809(500+309) = $441 limiting our chance to get the job or $1250 - $1925(500+1425) = $675 in loss on the job.

The more accurate your standards the better your chances are of maximizing profitability. If your estimating method compromises profits for the sake of speed you should examine your estimating methods.

CHARGEABLE EXTRAS A SIGNIFICANT REVENUE STREAM

By Mark Porter

When was the last time you produced a job without any changes ? Are you capturing the revenues for these legitimate extra charges or are they falling through the cracks ?. If not more revenue then at least avoid costs. If a job is changed during production and you did not collect the extra revenue for the change then you propably incurred more cost.

Finishers/Binderies provide quotes for customers and customers submit orders. The normal process is to ensure that the job submited and the quote provided are significantly similar that you can approve the production of the job. Once that approval has been given any customer driven changes to the order should be chargable. But how do you track these changes and bill your customer so that they feel compelled to pay but more importantly allow you to collect the charges without damaging your relationship with that customer.

You must follow a procedure to record all changes to jobs, chargable and non chargable, to ensure that that nothing falls between the cracks and is forgotten. But just recording changes will not allow you to collect your legitimate extra charges. The changes must be documented as to date, time, employee and reason the changes were made to provide the maximum support for your claims.

Documentation is not enough. The changes must be communicated to the customer at the time they are requested. The changes must be recorded as having been submited in writing to the customer, warned that they were chargable and that a price was quoted.

When the job is completed a full listing of all changes should be supplied to your employee in charge of invoicing. They can then decide which charges should be accepted, changed or deleted . The invoicing decisions are determined and the invoice is submited to your customer. If the customer questions these extra charges you can support your claims by providing the customer with the who, what where, why and costs details.

Hopefully your customer will start to provide you with better information when the jobs are first submited. Either way your company is in a better position because you are either collecting legitimate extra charges or avoiding the additional costs of providing those changes without charging for them