Quick Printing

FEB 2015

Quick Printing is the resource for the Commercial printing, visual and graphic arts industries. Since 1977, Quick Printing has focused on improving efficiency and increasing sales and profits in the print shop. Industry experts share their ideas and

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Money Talk 22 Quick Printing | February 2015 MyPRINTResource.com Smart Managers Set Performance Goals and Benchmark to Achieve Them When setting annual goals, look at your own historic performance and use external tools such as the Printing Industries of America Ratio Studies. By Stuart Margolis W e all know that year-end results are the culmination of results achieved monthly. To keep long-term planning simple, smart managers set annual goals then benchmark performance monthly to stay on course. When setting annual goals, look at your own historic performance and use external tools such as the Printing Industries of America Ratio Studies. Historic performance results can help set base-line goals while nationwide in- dustry reports will help you track and adapt to broader industry trends and call attention to proft-draining trouble spots in your organization. To accomplish internal benchmarking of historic performance or to accom- plish benchmarking of your organization verses the competition, frst standard- ize your framework. 1) Use industry standard formatting for your fnancial statements to facili- tate comparison and analyze data. Setting up a standardized framework allows for easy comparison. Why not set up your internal fnancial statements to mimic industry standards? Then, whether you are comparing results internally or externally, the work is seamless. An example of this standardized reporting format is as follows: Sample Industry Standard Financial Statement Sales ............................................................................... 100.00% Factory Cost of Product Materials Paper .................................................................................... 21.58 Other chargeable materials ................................................6.08 Outside Services .................................................................. 7.82 Total Materials ...................................................................35.48 Factory Payroll .................................................................... 25.17 Factory Expenses .............................................................. 16.89 Total Factory Cost of Product .......................................... 77.54 Gross Proft .........................................................................22.46 Administrative and Selling Expenses Administrative Expenses ................................................... 9.67 Selling Expenses .................................................................. 9.46 Total Administrative and Selling Expenses .................. 19.13 Income Before Interest Expense ........................................3.33 Interest Expense .................................................................. 1.18 Operating Income ................................................................ 2.15 Other Income ........................................................................ 0.47 Income Before Income Taxes ..........................................2.62% 2) List your Value Added (VA) calculation on the face of your internal fnancial statements. VA = Sales – Material Costs. It reveals the actual value you added to the paper, the ink, the fnishing, etc. A focus on VA allows you to concentrate on variations of in-plant manageable expenses such as factory expenses, factory payroll, and administrative/ selling expenses that need to be tightly managed. 3) Calculate most of your Ratios as a % of VA, not as a % of Sales . Using VA as the basis of ratio calculation has historically provided a better benchmark for monitoring costs and proft. For example, most industry studies have shown that factory labor costs as a % of VA need to be at 40 percent or less if the com- pany is going to be proftable. Only material costs and sales commissions should be calculated as a % of sales. 4) Benchmark against your own historic performance. Compare your actual numbers to your budget as a benchmark using monthly fnan- cial statements and rolling income statements.To monitor expenses and control costs, compare your monthly fnancial statements to your budget. Monthly fnancial statements provide clear and concise pictures that can be readily compared to budget and to industry standards. There are limitations to the monthly statement, however; so we also recommend using a three to six month rolling

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