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Accounting Crisis Mode --Dickeson

February 2003
It's beginning to look a lot like crisis—for a major portion of our commercial printing industry. The printing trade associations are struggling, merging to survive. Printcafe had an IPO (Initial Public Offering) in mid-2002 at $10 per share that, at this writing, now hovers at slightly more than $1 a share.

That group, formed during the dotcom frenzy, is a kind of conglomerate or trade association of four or five printing MIS (Management Information System) suppliers. Those suppliers provide the computer data model for several thousand printing companies. A few weeks back I visited with a major Rocky Mountain area printer.

"Rog, in all my years in printing, it's the worst I've seen. Our health costs now exceed $1 million," groaned Henry from a mid-size, single-plant printer in the Midwest.

Lacking Necessary Data

It appears that several of our largest, multi-plant, publicly traded commercial printing companies in the industry have no integrated central data management systems. Not more than six months ago, a representative of a major publisher called me. He said that they were negotiating a contract with one of our large, publicly traded printers. The printer was insisting on a 26 percent waste allowance for the paper that the publisher was to supply. Unbelievable? Not at all. That major printer was simply conceding that it had no statistical control of its processes.

Yes, Virginia, it's beginning to look a lot like crisis—and there's no Santa with a sleigh full of goodies in sight. It's a double whammy we're now experiencing. Demand for printing is down and our models for operating decisions are straw houses built on shifting sands.

Our GLA (General Ledger Accounting) system, with its balance sheets and income statements, has never pretended to be an operating tool. It's a complex set of creative snapshot values of ownership equities. And it's not a good snapshot at that; wouldn't make a decent halftone.

Our JCA (Job Cost Accounting) system is a view of BHRs (Budgeted Hourly Rates) that defies the understanding of rabbinical scholars. Job costs and ledger costs do not cross-validate. Neither provides the continuous and current monitoring of the Five Liquidity Sisters we must now have to survive.

Here's a very recent e-mail comment from one of my long-time industry gurus: ". . . The printing processes, size of firms and the accounting approaches with computers, have all changed dramatically. I wonder if there is anyone who still keeps books and worries about cost accounting any more. With electronic imaging, all that's left is the pressroom, and maybe some finishing. Distribution is more of the game and it's just direct cost, isn't it? The rest is shelf pricing, it seems to me. I could be wrong, but truly, how many printers are left to read your stuff?"
 

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