The importance of financial discipline for print

In his presentation to members of the print industry in September, Manoj Mehta touched upon finance and the key aspects that contribute to the management, sales and turnover of a business. He said, a print and packaging company needs to address a number of areas where manufacturing and industry sectors have been the hardest hit. With so many challenges contributing to pressure on margins, finance management is one area where there can be some relief. With much of the industry still only at 65-70% of pre-Covid demand levels, financial prudency is crucial.

Mehta said, every business has a set of internal and external motivators that drive its success. He highlighted the internal motivators as: growing the company’s net worth; making a mark across and beyond geographical boundaries and leaving behind a legacy for generations to come. The external motivators are: increased sales; expanding the business and innovation of products and services.

Manoj Mehta focussed on how a print company should set business goals. And then, how to achieve these objectives. Mehta suggested strategic plans with actionable steps as well as innovation of product and service to match new trends and consumer behaviour. He said, new-age consumers’ expectations from print communications are changing, and enterprises are adapting as a result. More and more lives have moved online as a result of the pandemic and this has stimulated an already growing demand for digital communications.

Print is still relevant and important for customer communications. However, print jobs are likely to have higher levels of personalisation and may be complex with a range of document inserts, some standard and some common. Therefore print firms should review mechanisms to monitor progress plus maintain healthy cash-flow and profits to supplement growth.

Mehta shared an example from marketing - as to how the product improvisation called "scenting the soap" led to soap sale. He asked the audience, "Did you know that 80 years ago, when soap was introduced for better hygiene, there were no takers? And then manufacturers started scenting their soaps." Later, Mehta said, research confirmed that consumers bought and used soaps not merely because of its hygiene qualities but also for their perfumes. This is the reason, the term ‘scenting the soap’ was coined.

Next, Manoj Mehta said, price your product right. Mehta pointed out that most companies often mark-up their products about 10% to 30% higher. And so, he said, "They also consider the costing sheet which typically includes raw material and the cost of conversion to finished goods." He continued, "Ideally speaking, the cost of goods should be priced as per their standard capacity when it comes to manufacturing and standard utilisation of resources in a service-based industry." In other words, according to Mehta, the standard costing should be applied as it takes into account wastage, under-utilisation of resources, logistics, etc.

Mehta also said to prepare for unforeseen events like the pandemic. He said the Coronavirus is an example of being ‘financially prepared’ at all times. He said companies should look at book losses and cash losses.

Book losses indicate that the company’s model is severely flawed and corrective actions need to be taken. Mehta said, a few corrective measures include: target setting, identify and negate loss-making verticals.

Likewise, Mehta said, cash losses indicate the shortage of operational cash that the company faces. The main reasons being late payment, slow moving inventory, etc. that burn a hole in the firm’s cash coming. A few ways to fix this according to Mehta is: measure the cash conversion cycle and lower its number for better cash conversion; plus one must ensure surplus cash by seeing that the rate of cash generated is greater than book profits.

Mehta said changes in market conditions happen very fast, and often, are beyond our control. Therefore companies must strive to be agile to swiftly adapt to the new circumstances. To achieve this agility, the company must be well-cushioned by cash or funds to invest in new technologies or diversify. This is only possible when there is free cash-flow and increasing profitability.

That’s why Manoj Mehta said "financial discipline matters."

In this sense, pricing and budgeting is the next big thing. Mehta said, "To make profits after calculating the material, technology and conversion cost, budgeting goes a long way." For this, the company should have the right strategy. He said "Companies want to grow big by doubling or tripling their turnovers, but do not have a clear strategy to achieve this. They assume that if they communicate their goals to the sales team, it will be achieved. Ideally speaking, revenue goals should be identified at customer, product or demographic level with a detailing of old and new customers."

Mehta also highlighted the importance of accountability. He said, the line items in a budget should have a person or department to ascertain that everybody is in it together and they are motivated adequately to achieve their goals.

Finally he said, the operation should be smooth and glitch-free. He said, "Labour, equipment, logistics, conversion costs are all considered while determining the price. But smooth business operations require timely support and backup of infrastructure and it’s been rightly said 'Time is Money'."

Mehta concluded his presentation by stating, the print industry should design services with customers at the centre and at the same time, “understand their evolving needs and align the whole business behind a coherent service strategy”.

He also said print firms should understand the importance of customer service - and what it means to the business, identifying key parts of the process and where it can all go wrong. He suggested "measuring success in delivery, identifying areas to address and taking action to improve continuously".

And finally, he said one must not forget that employees are part of the process – they should be trained and developed accordingly. Not just on the technical skills required to do their job, but also the softer skills which will help them deal with challenging situations, understand the different needs of customers, and cope with the business pressure.