Don’t Lose Sight of Your Cash
This year has been challenging on many fronts, but particularly with material and supply side challenges. You need paper to print on, right? So when material becomes available for sold work, or in anticipation of future projects, printers purchase as much as they can. The initial challenge this presents is the availability of warehouse space. Skids of stock are being stored in every nook and cranny that can be found. For those with available space, this is less of an issue. For others, this creates a material handling nightmare. The two main business concerns this creates is maintaining accurate inventory records – where is it, what is it, and how much is there, and managing cash.
Back in the day, paper for live jobs could be ordered today for delivery tomorrow. Remember that? Many shops maintained a house stock inventory, but for the most part, paper was ordered as you needed it. Maintaining an accurate inventory system was not overly taxing and for the most part, they could always go onto the floor to see what they had available. Much of that changed when the supply chain was disrupted. It’s no longer adequate to rely on walkabouts to manage inventory. We’ve seen many inventory levels increase 2-4x and more, that’s a lot of cash sitting on the floor.
Even if you don’t have enough space to properly store paper, you need the discipline to know what you have, where it is, how much has been allocated for a job and how much you actually used. These changes to supply chain and paper availability exposed the gaps in many inventory control processes. Find ways to tighten up your procedures around inventory. Think of it as stacks of dollar bills sitting on pallets – engage your team to improve the reliability and repeatability of your process.
Protect Your Cash
Cash is not necessarily the profits you made this month, cash is what you actually have available to operate the business. In general, cash is king. Even though you may have a profitable business, a spending spree on paper inventory can lead to cash needs outpacing cash availability. More than ever, businesses should have a good understanding of their cash-flow cycle. These are a few areas to review if you want to improve your cash management.
- Send your customer invoices out faster. If you don’t know your average ship-to-bill days, it’s probably already too long. More and more printers are sending out invoices on the day the job ships.
- Improve your invoice collection time. Making this metric one of your KPIs will at first be enlightening, and then will soon make difference in your results.
- Negotiate your best credit terms with your suppliers. Even a few extra days in the payment cycle can be advantageous.
- Invoice for paper on larger projects at the time of order. This is cumbersome for smaller projects. You can decide the dollar threshold based on your own business. The paper supply issues have changed the rules. More customers are more than willing to pay for paper earlier to secure material for their projects.
There are no silver bullets to these issues. And not to diminish the importance of these two concerns, it usually boils down to having the discipline to follow your established best practices – also known as blocking and tackling. Please add your thoughts and comments below.
Mike Philie can help validate what’s working and what may need to change in your business. Changing the trajectory of a business is difficult to do while simultaneously operating the core competencies. Mike provides strategy and insight to owners and CEOs in the Graphic Communications Industry by providing direct and realistic advice, not being afraid to voice the unpopular opinion and helping leaders navigate change through a common sense and practical approach. Learn more at www.philiegroup.com, LinkedIn or email at firstname.lastname@example.org.
Mike Philie leverages his 28 years of direct industry experience in sales, sales management and executive leadership to share what’s working for companies today and how to safely transform your business. Since 2007, he has been providing consulting services to privately held printing and mailing companies across North America.
Mike provides strategy and insight to owners and CEOs in the graphic communications industry by providing direct and realistic assessments, not being afraid to voice the unpopular opinion, and helping leaders navigate change through a common sense and practical approach.