In these hard financial times, a question that many manufacturing business and workshop owners need to ask themselves is, "are our good customers costing us money?"
For a business that's producing a million identical widgets every month, it's relatively easy to determine the production cost, and ultimately the profitability. However for many small companies it's not that simple. They provide a variety of products or services, perhaps only to a handful of customers. Each job is different and usually has been won after some intense negotiations on price. Job quotations have been based on a best estimate of what it will cost to produce the product (or provide the service), with the hope that production costs will then stay within budget.
Some reassurance may come from a customer being a major player on the industrial scene and therefore unlikely to default on payment, particularly as some of the smaller customers are struggling to make ends meet and asking for better credit terms.
But after the monthly accounts have been finished a small business may be looking at a loss. Revenue targets were met but the costs hugely exceeded the estimates. It raises many questions. How did that happen? Was it material costs? Were more used than allowed for or has the business been hit with supplier price increases? Perhaps it was labour costs? Did it take more time than expected? Did overtime have to be worked to get the job completed on time and if so could that cost have been passed on to the customer? Did the employees spend too much time on unproductive tasks? Which jobs lost the most money? And so on.
Small business owners facing these dilemmas are increasingly turning to software programmes to determine the answers to the questions of profitability and productivity. It's not hard to see why. Job management software can put an end to poring over the monthly accounts trying to find out what went wrong. Instead, a little time each day spent on the pc can show such things as how the previous day's jobs performed against budget, how much time was spent between productive and non-productive tasks and which employees worked on which jobs. Some job management software can show the projected gross margin on each job, or provide an overall gross margin report that lets businesses know very quickly who their really profitable customers are.
With this knowledge, small firms can eliminate those jobs costing them money and instead focus on the profitable ones. In the midst of a recession, that's invaluable.
For a business that's producing a million identical widgets every month, it's relatively easy to determine the production cost, and ultimately the profitability. However for many small companies it's not that simple. They provide a variety of products or services, perhaps only to a handful of customers. Each job is different and usually has been won after some intense negotiations on price. Job quotations have been based on a best estimate of what it will cost to produce the product (or provide the service), with the hope that production costs will then stay within budget.
Some reassurance may come from a customer being a major player on the industrial scene and therefore unlikely to default on payment, particularly as some of the smaller customers are struggling to make ends meet and asking for better credit terms.
But after the monthly accounts have been finished a small business may be looking at a loss. Revenue targets were met but the costs hugely exceeded the estimates. It raises many questions. How did that happen? Was it material costs? Were more used than allowed for or has the business been hit with supplier price increases? Perhaps it was labour costs? Did it take more time than expected? Did overtime have to be worked to get the job completed on time and if so could that cost have been passed on to the customer? Did the employees spend too much time on unproductive tasks? Which jobs lost the most money? And so on.
Small business owners facing these dilemmas are increasingly turning to software programmes to determine the answers to the questions of profitability and productivity. It's not hard to see why. Job management software can put an end to poring over the monthly accounts trying to find out what went wrong. Instead, a little time each day spent on the pc can show such things as how the previous day's jobs performed against budget, how much time was spent between productive and non-productive tasks and which employees worked on which jobs. Some job management software can show the projected gross margin on each job, or provide an overall gross margin report that lets businesses know very quickly who their really profitable customers are.
With this knowledge, small firms can eliminate those jobs costing them money and instead focus on the profitable ones. In the midst of a recession, that's invaluable.