Note: This is the first of a two-part update of a similar article I wrote in 1999, which proved popular.
I have spent a lot of time with printing companies in the $250,000 to $350,000 sales range since I first started full-time consulting in 1985. In 1999, I wrote a piece about common issues among companies of this size. I wondered what had changed then since, so I took a look and found that, besides our technology, not much else has. Here’s an update.
Just as in 1999, this size company usually doesn’t have much cash or much of a current ratio (current assets/current liabilities). Of course, there are exceptions and this condition isn’t just limited to this size shop, but it seems to me that it’s quite common at this size.
What’s the reason? Why don’t we have money? Well, we don’t make money. Why don’t we make money? Well, we usually don’t have the information we need because real financial information is largely non-existent, flat out wrong or, at best, very poor.
Why don’t we have the information? Usually the financials are prepared internally and just hitting the “profit and loss statement” report on QuickBooks doesn’t make them right.
What could go wrong? Commonly, adjustments to the balance sheet aren’t made. Perhaps accounts receivable says we have $200,000 owed to us, but there’s really only $100,000, or that inventory shows up at $50,000 and we have only $1,000. And what about those “cash advances to employees” who left years ago? They quite frequently are still on the books as an asset. Left untrained, these adjustments never get made and thus the amount of money we show we make is…well…wrong.
Further, the printer reading the financials most often doesn’t know how to interpret them, for that matter, so we don’t know what’s wrong. It’s like some people who, while driving the car, hear the funny sound but don’t get it looked at because the car is still going. The noises we hear in our businesses usually come from our heads or guts. Something is not right, but we don’t know what.
There are sources to learn financial literacy or you may get local professional assistance. I have even published training material on my website that will help (www.myprintresource.com/10004688). My book “Prospering”, which can also be found on my website, has many chapters dedicated to the subject.
Learn to Earn
But the point remains. Most in the $250,000 to $350,000 sales range don’t know what’s wrong because their financials are non-existent, flat out wrong, or very poor. And if we don’t know what’s wrong, we don’t know how to fix it.
More importantly, we often make dumb decisions because we don’t have good financials. With a good set of financials, it’s easy to set up a cash flow budget. Once that’s done, you can see where you are going to be; not where you are.
So, instead of buying equipment based on rumors, hopes, and dreams—thinking we’re just this one piece of equipment away from having a prosperous business without having to sell anything to anyone—we can base decisions on what is projected to happen. Of course, not all plans work out, but planned things do happen best.
An additional problem crops up in industries whose costs are closely allied with price (like offset printing). We need good financials to know what our costs of business are in order to pass them along to customers in hourly rates.
So I find that, just like in 1999, the first big issue companies in the $250,000 to $350,000 sales range have in common is that we still don’t have good financials. That affects the amount of money we have and the money we make. Remember, it’s not businesses that have money that need accurate and timely financials; it’s those of us who don’t have money and need to make every penny count.
Next month we will pick up on other commonalities between 1999 and today.
Tom Crouser is principal of Crouser & Associates, Inc., 4710 Chimney Drive, Charleston, WV 25302. Contact him at 304-965-7100 or email@example.com. Learn more at www.myprintresource.com/10004688. You can receive Tom’s weekly newsletter and participate in his surveys. Go to http://crouser.com/panel/ and sign up. Follow him at www.twitter.com/tomcrouser.