Are you a tracker or non-tracker?

[CES020]

Just thought I'd bring this up for conversation. I spent many years in manufacturing, many years working through the Japanese production system and eliminating waste, etc. During that time, I had come from the background that you need to track every thing. I had that background because we always answered to accounting to some degree and in many cases, my CEO's had bean counting backgrounds. So it was instilled in me to track costs.

Then I went off the path when I started getting into the Japanese techniques. It made me question everything. And many times I got questioned. For instance, we built machines that had 1000's and 1000's of parts. We opened work orders for each of those and tracked them, their progress, and their cost to the penny.

Some top level guys from a Fortune 100 company came by and started mentoring me on some of it. They asked "why do you track that". I really didn't have a great answer, other than "we need to know the costs". They asked me why we couldn't release work in lots and only maintain a few work orders. All the materials and labor would still be tracked, since we paid the labor and tracked the material costs. I didn't have an answer for them.

So we experimented with it and it worked really well. It made our throughput increase and our profits rise. It was really a remarkable thing to be a part of and witness.

So fast forward many years now, and we call in a CPA to come into the shop to help with some book related stuff we were changing over to another system.

After working here for a week, she says "When we get this all done, we'll get you set up on job costing and tracking all your jobs". I said "No thanks". She looked puzzled. I asked her what level she wanted to take it and she wanted us to enter work orders, track the materials, and key in time for each job. I asked her how much it would cost to do that for a name tag we sold for $15. I explained we'd have more time tracking the job than actually making the job.

She firmly believed it made good business sense to spend 10 minutes tracking a 5 minute job.

She said "how else will you know if you made money?". I said "I did this job in 5 minutes, start to finish, it took .30 cents worth of material. We sold it for $15. What more do I need to know?

So I'm firmly planted in the "non tracker" mode of business.

So what are you? A tracker? A non-tracker? A partial tracker?

 

[tcorn1965]

Start tracking now. What she said is valuable. Get this...small job...small job...small job... adds up to end of the year numbers. You have a manufacturing background so you know the whole BTO system and every part and costs need to be accounted for. How can you effectivley budget for the next quarter without a system that can account for it?
My 2 cents

Terry

 

[CES020]

I'd go out of business if I started tracking to the level she wanted. Let's add up the day "2.5 hours of billable labor, 5.5 hours of tracking job costs. How'd we do today?".

Don't get the impression we don't know what it costs to do a job or how much we have in it. We do. I can also tell you that we were far more profitable in 2010 than the year before.

Budget for the next quarter? We're not running a multinational conglomerate (sp?)! It's a small business (very small)!

 

[Locals Find!]

Partial Tracker. Quickbooks makes keeping track of some parts easier than others.

I am with you though. If you spend 5 minutes making something and .30 cents in material. Your ahead so why bother tracking it.

Big stuff it makes more sense though.

 

[CES020]

True, and we're not like some companies here, making large scale, complicated jobs that need a lot different materials and get worked on for weeks. Our jobs are typically smaller, done in minutes type jobs. If we were doing larger, complex jobs with bills of materials and multiple employees, we'd work something out to partially track it, but as the guys that quote the jobs and do the jobs, we're pretty much non-tracking. I'm not trying to have my mind changed or change anyone's mind, I'm just curious where you are.

 

[Kevin-shopVOX]

Track costs by entering them into an accounting software. Know your overhead burden rate and what you want to sell that time for per square foot (A sign POS really helps cover that aspect) and have shop minimums. This should be all you need to have a P&L that you can analyze monthly, quarterly and annually to make adjustments to make COGs smaller, Gross Profit higher and manager the overhead percentages for a healthy net. I have a target goals for each and I try to run my business that allows me to stay within or exceed them.

 

[binki]

We try to get a $/hr on each job and a $/Day for each day of work and a $/Week and a $/Mo.

We have a number of 'standard' items that we produce and we have an average time/cost that we know so we loose some and win some depending on the details of each particular job.

Given all of that we try to combine work in a day that gives us our desired daily rate.

But we also know that our short runs have far more overhead than longer runs and that is the balancing act we are in every day with everyone wanting their stuff yesterday.

Maybe if we were bigger and we had a floor for gross revenue on a job we would do this but we are not there, not even close, so spending a lot of time tracking each job is not worth the time. Only the largest of our orders get that type of attention and that is because we busy the machines and have to break in to get other things done.

 

[SignManiac]

I try to spend it as fast as I make it, therefore it's an even wash and no real need to track. You're all gonna be dead sooner than later, don't sweat the small stuff.

 

[klemgraphics]

I try to spend it as fast as I make it, therefore it's an even wash and no real need to track. You're all gonna be dead sooner than later, don't sweat the small stuff.

Sounds like what I do, and my wife is even worse at trying to spend it for me.

 

[James Burke]

I think you need to keep it all in perspective. One wise man once said to me:

"Know your costs, and you'll make money by default".

Splitting hairs isn't the most profitable thing to do when business needs tending to.

I think the most important thing is to use a system that works for you, be it an I Pad, Computer, or a good old pencil and paper file system. When a system works, you'll be more likely to stick to it.

 

[grampa dan]

In our shop we only do bigger projects. I like to do my math at the start of a project - not all the way through. Pricing (through much experience) is done in a shoot from the hip kind of fashion. We've never tracked our projects, even when I had a crew of more than twenty.

The labor costs, material costs for each project were figured out. After the project was done (sometimes lasting weeks or months) I would glance at the accounting printouts labor and material costs only, to see how we did. If we were on track, OK - if not I'd make a mental note and adjust things accordingly on the next project.

While it is critical we make good money on the projects we do I find it much more enjoyable to get that part of the equation as fast as possible and then concentrate on the art.

-grampa dan