Dickeson--Don't Be Baffled by Accounting MetaphorsSeptember 2000
But, at the same instant, the dotcoms confront us with the harsh reality of cash flow. Maybe profit is an illusory opinion, but cash (or equivalent liquid assets) is a fact. A printer may comfortably survive with a 3 percent profit illusion on sales, but neither dotcom nor printing company can comfortably survive without liquidity—cash. The stock market investors' wishful projection of the current worth of future profits or earnings is, once again, simply an investor's opinion, another metaphor derived from virtual reality. So now we have both accounting and market investors' opinions of value.
Where does that leave us with our job cost estimates as a basis for establishing a price for a print job? Are "cost estimates" also metaphors of virtual reality? Of course they are. A cost estimate based on "production standards" of time and materials are estimates of what an accountant's opinion of profit might be if all cost assumptions came true—which never happens. Now we have three views of virtual reality.
Even currency itself has certain transitory value. Ask the currency speculators making a living on arbitrage between currencies. Look at the daily value listing of yens, euros, pounds, bats or pesos. And a 1990 dollar had a lot more value in purchase power than a dollar today.
Peter Drucker asserts the three things that must be managed are liquidity, productivity and being in business tomorrow. Note the absence of "profit" in his list of management imperatives. What we are really saying is that current liquidity, in whatever form, is more nearly an ascertainable fact than a ledger accountant's or cost accountant's or investor's opinion of profit or earnings.
And we even hold reservations about the value of cash as a liquidity measure. All we have are opinions expressed as metaphors that mustn't be regarded as dogma. Each opinion has some usefulness. Each has known weaknesses. But, for goodness sake, watch the cash drawer first, foremost and always.
When setting a price for a commercial print job, take a quick look at the estimate values if you wish. Wet your finger and hold it up to find the direction of the breeze. Then answer these questions: What perceived value does the customer have for the job? How quickly will the invoice be paid? What are the competitive constraints?
In making the price decision, liquidity (speed of payment) takes precedence over any metaphor of profitability. I'm not advocating disregard of job contribution or earnings or "profitability." Just recognize the frailty of underlying assumptions and resist being dogmatic about those opinions.
Metaphors are short-cuts for thinking and wisdom. You may say your neighbor is a bear or that particular press model is a dog, but neither is fact. It's just shorthand to call up a list of characteristics. The estimator may say that a prospective job should yield a 24 percent contribution on value-added, but that isn't a fact; it's metaphorical. But if the controller says that account pays in 90 days, take that as fact!
—Roger V. Dickeson
About the Author
Roger Dickeson is a printing productivity consultant based in Tucson, AZ. He can be reached by e-mail at Roger@prem-associates.com, by fax (520) 903-2295, or on the Web at http://www.prem-associates.com.