Reports to Bank On --Dickeson

Since offering my book, Monday Morning Manager, free to anyone requesting it by dropping me an e-mail, I've sent out 237 copies. This makes me think that there are quite a number of printers giving serious thought to a better way of making decisions for their business. There's really a concerned minority who are thinking about liquidity, productivity and tomorrow. Several have requested that I spell out, in some detail, what I'd consider an ideal set of reports as a basis for decisions.

First, let's be clear about the main contention. We must have weekly reporting. Ideally, 13 weeks (a quarter of a year) should be reported in a rolling fashion. Each week, add the latest week and drop the oldest. Show the average week. Project that average by multiplying by 4 to equal a year. This is saying that if we continued on as we've been doing for the latest quarter, this is where we'd wind up for a year.

The report changes a bit each week depending on the decisions we make during each of the seven ensuing days. These reports, each on a separate page, should be available every Monday morning for the week just ended.

Each report is accompanied by a simple, clean, line graph of the decision element being reported. Each line graph has an overlay of a straight trend line to show the direction it's heading. First, look at the big picture on the graph, then look at the detailed numbers as needed. Make decisions for the coming week. See the result of decisions next Monday.

It's a cash out to cash in idea. In printing, it's cash out to cash in when the account's collected. Follow the prime raw material through the plant. The speed of that movement—the throughput—including the speed of collecting, is critical to the degree of success of the business. Any impediments to the cash out to cash in throughput are constraints that must be alleviated by decisions. Attack those constraints one-by-one.

Okay, so what do we measure to detect the speed of throughput? Let's spread eight pages of those reports out on the table at our Monday Morning Meeting and make decisions. What do we measure and report?

1) Cash. Measure the balance on hand at the end of the week plus all cash payments during that week. Compute Days of Cash Available. Divide the balance in the bank by the payments and multiply by seven. Report averages and annual projections. Plot the days of cash available for each of the 13 weeks and overlay a straight trend line. If you're into a line of credit, use negative numbers.

2) Raw Material. Measure your constant, most important, raw material—most likely paper for a printing business. The material on hand (raw inventory) at the end of the week, divided by usage for that week, multiplied by seven. That equals the days on hand of the material. Report totals, averages, projections and plot days of raw materials for each of the 13 weeks.

3) Materials in Process. Measure the balance of that prime raw material in the printing process at the end of the week and divide it by the total of that raw material used during the week, then multiply by seven. That's your days of material in process for a week. Report totals, averages, projections and plot days of materials for each of the 13 weeks.

4) Finished Goods. Measure the balance of prime raw material in finished goods, divide by the amount invoiced during the week, multiply by seven and then report totals, averages, projections and plot the finished goods on hand for each of the 13 weeks.

5) Receivables. Measure the balance of the account, divided by collections and multiply by seven. Report totals, averages, projections and plot each week. This is often called days sales on hand.

6) Days Throughput on Hand. Add the days on hand of Raw Material, Materials in Process, Finished Goods and Receivables. This is the total of days throughput required for processing to cash in the drawer. Report totals, averages, projections and plot total days throughput.

7) Total Waste Recoverable. Divide the dollars of paper in goods invoiced or shipped during the week by the dollars of paper used to produce those same jobs to obtain the waste ratio. This is the limit of total waste dollars recoverable. Report totals, averages, projections and plot ratios weekly.

8) Proposals and Closings. Divide the value added by booked sales commitments during that week by value-added in all outstanding sales proposals to get the ratio of value-added closings to proposals during the week. Report totals, averages, projections and plot weekly ratios.

Except for the annual projections—kind of a throw-away value—there are no predictions, budgeted hourly rates and no complex of profit assumptions for general ledger reporting.

You may not keep a finished goods inventory. You need to. You've got to have some way of knowing the time lag in getting invoices out. You also need a break-even bogey to give you perspective and a variance on the cash statement.

Think you could run a printing company with these eight rolling weekly reports—make sound decisions? Try it. You'll like it.

About the Author

Roger Dickeson is a printing consultant in Sylmar, CA. He can be reached at rogervd@verizon.net. You can have a free copy of his book Monday Morning Manager by requesting a copy by e-mailing him at that address.