Too many printers ask the same question over and over: “How come we made money on all our jobs, but lost money at the end of the month?”

The answer is pretty simple: no matter how good your cost sheets look, they’re a poor predictor of financial results. That's because your income statement doesn’t know anything at all about your cost sheets. It just knows that you had X dollars of sales and Y dollars of expenses. It doesn’t care how you got there. It just wants more sales than expenses.

Yes, if you sell only high-priced jobs, each of your cost sheets will look beautiful, but you probably won’t have enough jobs to cover your costs. That’s because most printers can’t sell all of their capacity at high prices. Meanwhile, monthly costs remain highly fixed, so if there’s not enough work to cover all the fixed costs, the month’s results can be pretty dismal.

One printer had terrific pricing discipline and was generating almost 70% in average value-added content. But they were very fussy about the work they took, and when sales dropped unexpectedly, they didn’t replace the higher-priced sales with any other sales. Their inside costs remained highly fixed (except for saving a few dollars in sales commissions) and the lower sales fell directly out of their profits. Yes, they still had beautiful cost sheets, but their income statement grew a few big scars.

The single thing that sets the profit leaders apart is how busy they keep their plants. They know that you can never make up for having too little work, no matter how good your pricing may be (and no matter how good your productivity is). So they sell everything they can at high prices, and if they have any capacity left, they sell it at the highest prices they can get. But they make sure to sell it. They may wind up with some homely cost sheets, but they also have much better-looking financial statements.

PS: You can match your income statement and cost sheets, but why bother?

Hourly rates reflect a guess as to how many hours you will sell in a given time period, and printers use those projected hourly rates to absorb their fixed costs for that period. But they forget that in a quiet month where fewer hours have been sold, the actual hourly rate would be higher, since there are fewer sold hours to absorb the same costs.

Of course no one figures their hourly rates every month, but if a slow month’s cost sheets were adjusted to reflect that month’s real hourly rate, they wouldn’t look good at all. They would look just like the income statement.

So you can match your income statement and cost sheets, but why bother? In fact, any printer who goes to the trouble of doing so probably isn’t spending enough time selling jobs and figuring out how to produce the work quickly and profitably.

This blog post originally appeared in the "Random Rosenisms" blog at Bob Rosen's website www.RHRosen.com