Effective costing data from your MIS?

Pricing and profitability in PrintSmith

There are a number of things to consider when reviewing pricing and costing in PrintSmith (or any MIS). 

In order to begin costing jobs in PrintSmith you will need the following basic information:

  1. All paper costs (including LF rolls). Its advisable to delete any obsolete or unwanted stock before you start.
  2. Cost of Litho plates, inks, chemicals, toner/click charges and any other materials.
  3. A figure for the general overhead (cost of premises, power, non production staff costs, insurance, finance etc.).
  4. Individual production staff costs for each sales category.
  5. Lease or finance costs for production machinery, RIP or software charges.
That's the important information that you will need before you begin costing in PrintSmith. The notes below outline, as concisely as possible, the ways in which PrintSmith calculates prices and profitability. The length of the explanation makes it look a bit more complicated than it really is.

PrintSmith uses four main pricing methods. They are:
  1. Internal cost plus mark-up, used for (litho) Press Definitions.
  2. External cost plus mark-up, used for outside services.
  3. Internal cost v. matrix price, used for digital prices.
  4. Internal/external cost v. set price, used for charge definitions.

The internal cost plus mark-up method, as used for Press Definitions depends upon setting an hourly cost labour rate the use of which is governed by speed and waste tables. So not only does the labour rate need to be as accurate as possible but the waste and especially the speed table need to reproduce the actual production situation. Press labour rates should really be recalculated on an annual basis. Information on press speed tables is available from press manufacturers and the BPIF, but recording your own press speed data over, perhaps two months, will give better results. 

The external cost plus mark-up definitions include external full colour, external print, external digital and merchandise. These are extremely straightforward as they are always based on a quoted price from a supplier, plus mark-up.

The internal cost v. matrix price method, as used for Copier Definitions is considerably easier to set up and control as unlike a cost plus mark-up definition (where altering the cost labour rate will alter the price) cost and prices are entered separately on to the system. Prices are entered via a matrix, which is independent of the costing calculation. Digital costing data becomes important when starting to use the “Work in Progress” report for production management. Costs are entered via a series of fields, which include the number of hours the machine is available for production, it’s speed, monthly payment, monthly burden rate (overhead), percentage of available time in use and individual costs per copy. From these figures the Copier Definition then calculates the ‘Machine cost per copy’, which includes an amortisation of the overheads if they are included.

Internal cost v. set price, as used in charge definitions. Charge definitions in PrintSmith include all Pre-press and Finishing charges. If Charge definitions have not had costs attributed to them, profitability analysis in PrintSmith will malfunction. Reviewing and attributing costs to Charge definitions takes less time than you might imagine (providing that the costs are known). It is better to have an estimated cost in a Charge Definition than no cost at all, which will show as either 0% or 100% profit in PrintSmith.

Comparing the profitability of Litho against Digital in PrintSmith will only be possible if costing is consistent between the two. For consistent costing it is important that general overhead costs are apportioned correctly across the various production departments. PrintSmith’s ability to produce profitability reports by customer, business type, or sales rep is also affected by this. More importantly, correct costing is vital for the more advanced functions of PrintSmith, such as job scheduling, as they rely on accurate and consistent cost and time calculations. Addressing these issues now will assist in improving the ROI in PrintSmith. Please contact me if you require any further information. I would be more than happy to demonstrate how costing in PrintSmith works.

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