Cost rates are back

Just like the ra-ra skirt, cost rates are making a comeback!

There was a time, until perhaps five or ten years ago, that hourly cost rates commanded a certain respect. Such deference gradually ended for two reasons: first, the means to calculate an accurate set of cost rates is sometimes so elusive that busy printers grow tired of trying to pin them down. Secondly, printing has become so overwhelmingly competitive that, to many, cost rates are almost superfluous, the market inexorably controlling selling prices.

As the printing industry evolves, there will always be a residual uncertainty about just how important cost rates really are. It is possible that the need to have a completely accurate set of rates is, in fact, purely illusory. There is, however, compelling evidence to the contrary. The impact of your cost rates is most sharply focused by ignoring them.

Why are they so important?

Consider your management information system. In spite of the intellectual achievement of bringing computational discipline to the chaotic environment of a print shop, MIS still relies upon cost rates. This simple fact means that every MIS, no matter how sophisticated, will be fundamentally miscomputing the facts if your cost rates are wrong. Rubbish in, rubbish out, so they say.

This is quite a challenging and provocative idea. One's instinctive reaction may be to simply dismiss it, but the fact remains that the involvement of cost rates in your business is much more profound than you may be prepared to admit. In fact, there still remain a significant number of printing companies who possess the greatest antipathy for their cost rates, insisting they are irrelevant whilst the market dictates the price. In other quarters of the industry, there is a tendency to view cost rates as unchangeable and inflexible - reliance often being upon rates that were calculated years previously.

An added complication lies in the varying standards and methods employed by printers to calculate their cost rates. Spreadsheets play the major role for most. Others prefer to delegate the task to their company accountant or a trade consultant. A small minority are happy to wet a finger and stick it boldly it in the air. But a growing trend is now seeing the standardisation of cost rate calculation under the influence of specialised third party software, such as our own. The benefits of getting the right software can be considerable, providing genuine savings in time, money and effort. The real challenge is convincing printers they actually need it.

Is it really possible to reconcile the idea that maintaining a set of potentially inaccurate cost rates month after month, year after year is somehow conducive to stability and growth? The answer is 'no' - but nobody likes change, however necessary change may be.

Back in fashion?

For our part, Haybrooke Associates is bringing the method for calculating cost rates firmly into the 21st century with our unique software, CostDriver. If it helps to take away some of the complexity and expense of cost analysis and financial forecasting, it is assured its place in the ceaseless advance of technology within our industry. And, who knows, with our help, cost rates might even become fashionable once again!.

Telephone:
+44(0)116 2711000

Email:
postmaster@haybrooke.com

Website:
www.haybrooke.com

Main contact:
John Roche CEO
email or telephone 0116 2711000.