Management For Profit.

Not By Profit

The purpose of business is the creation and maximization of profit. Profit management often becomes more of a hoped-for effect of other business decisions, rather than a proactively predicted, managed and measured core goal.

It is ironic that the creation of profit is the central focus of all business activities, yet most of us spend our time managing the factors which produce profit rather than managing profitability directly. Instead of making decisions that indirectly influence profit, executives should be attempting to determine the effects of their decisions on profitability ahead of time.

Proactive profit management allows you to know the effects on profitability of different resource allocations before you make the decision as to which resource to use. For example if you change 20% of your lower-profit activities to higher-profit activities, how does that affect your final margin? If you decide to tie your sales commissions more to profitability than volume, how will that add to your margins.

The most successful organizations are those with the greatest ability to grow and manage profit. Since business environments and variables are constantly changing – it is essential that scarce business resources be consistently reallocated to the most profitable activities.

Profit is not necessarily in direct proportion to production volume and machine loading. Activity and productivity, whether it be people or equipment, are two entirely different elements. In business the most fundamental measure of productivity is profit contribution. Most production records will tell management how well a piece of equipment operates, but not its contribution to overall productivity.

Ideally, when we compare contribution margin to production volume, the most profitable products should be consuming the most production volume. Similarly, if we divide customers into high/medium/low profitability, then the most profitable customers should be consuming the most organizational resources. Sales efforts and incentives should also be devoted to the highest profit product lines and marketplaces, and so on.

What many companies don't have is the abiliity to collect, interpret and use this information in a topical or meaningful manner. Most of this information is only available to management in summary form through the period reports produced by their accounting system. This information while necessary for other reasons is at best ancient history and often is not relevant in making day to day manaufacturing, estimating and pricing decisions. Management must be diligent in interpreting these known facts and using them for the creation of maximum profit.

Only a well designed MIS system that produces up to date reports with accurate and useful information can do this.

Such a system is Accura. While most printing management software systems are template designed and driven Accura was developed to allow printing companies to fully customize internal and external reports to best suit their individual requirements.