Printing Industry Closed-Loop System To Knowing Your True Costs

One of the most important factors for running a successful printing organization is your knowing your costs. Monthly financial reports can tell if an organization is making or losing money, but DO NOT TELL YOU WHY.

The industry best practice is a closed-loop system that tells you WHY and WHERE your organization is performing financially. The closed-loop system should consist of the following components for estimating costs, pricing jobs, and measuring "True Costs":

1. Equipment budgeted hourly cost rates that reflect your financials
2. Estimates that reference your budgeted hourly cost rates to forecast the cost of producing orders/jobs and support pricing decisions
3. The actual costs of producing orders collected from your shop floor data collection, purchasing, and inventory software
4. Job costing reports that show your estimated costs verses actual costs so you can bring your estimates in-line with your actual costs by either adjusting your estimates or improving your production processes
5. Financial reports that show your monthly, quarterly, and annual costs so you can bring equipment budgeted hourly cost rates in-line with your financial

Implementing this best practice provides many benefits including:

• Identifying your out-of-pocket costs so you can appropriately price orders that recover your costs
• Determining a price that includes an element of profit (unless you’re a non-profit organization)
• Identifying the need for improving production processes, equipment capabilities, or employee performance
• Defining what types of products your organization is best at producing (your niche)
• Defining what customers your organization is best at servicing

By: Craig L Press
President
Profectus, Inc.



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