There aren't many printing companies that haven’t faced a cash flow crunch at some point. The causes can be seasonal slowdowns, macro-economic events like the pandemic, or internal financial management problems.
A study by QuickBooks found that 68% of the businesses they surveyed have cash flow problems. The number who say cash flow is a "major problem" doubled from 2021 to 2022, due in large part to rising costs.
Management experts Deloitte offer several ways to preserve cash during down times. Their proven suggestions are based on their experience working with tens of thousands of companies.
Below are highlights of their main cash flow suggestions which are relevant to the printing industry. There is also a video that explains how to implement cash flow forecasting to avoid cash flow problems.
6 Tips to Improve Cash Flow and Profits in a Printing Business
1 – Actively manage payables, receivables, and inventory. When times are good, companies tend to get lax about managing these. Unless there is a system in place to track, review and make ongoing adjustments to these three items, cash flow can take a fast and surprising hit when things go south.
2 – Avoid or delay capital expenditures. The downside is this can stunt revenue growth. (We have a workaround to help you grow your company without capital expenditures, below.)
3 – Review and manage variable costs such as travel, entertainment and discretionary spending.
4 – Distribute workflow among staff (cross-training) to avoid layoffs. If layoffs are unavoidable, reduce staffing to a level where more overtime (and not necessarily more staff) will cover the busy periods.
5 – Convert fixed costs to variable costs wherever possible. For example, sell assets and lease them back.
6 – Deloitte also suggests contract manufacturing and third-party warehousing as an excellent way to reduce fixed costs.
How a Trade Printing Company Can Help Manage Cash Flow
A trade printing partner like Western Trade Printing can help companies manage and even prevent these cash flow crunches in at least four ways.
1 - Reduce capital expenditures
For example, why risk buying or leasing a 4 or 5-color press when clients can use ours as a resource? Bindery equipment is another area where capital costs can quickly escalate.
Western Trade Printing has a several 40” offset presses up to 40”. Our bindery department is well-equipped with cutting, folding, saddle stitching, perfect binding, die cutting, and pocket folder converting equipment.
2 - Convert fixed to variable costs
Sell under-utilized printing or bindery equipment and use WTP to fill the gap when the need arises.
3 - Reduce or eliminate other fixed costs
Companies that offer fulfillment or warehousing services internally can shift some or all of that to Western Trade Printing.
4 - Streamline Business Operations
Western Trade Printing’s staff has 250+ years of collective print industry experience. Everyone at WTP has spent years working in this industry. Their collective experience, skills, and knowledge are available to all clients.
WTP routinely collaborates with clients on ways to streamline their printing business operations in order to improve cash flow and grow revenue. They’ve had experience working with commercial printing businesses and brokers to overcome a variety of challenges including troubled acquisitions, in-house production problems, company transitions, and more.
You can read several WTP Case Studies here.
Working with a trade printing partner like WTP is an efficient way to reduce expenses, increase cash flow, and grow revenues. It’s a simple way for print service providers to get substantial growth without the stress of more internal production headaches.
Preparing a Cash Flow Forecast
Most companies routinely review their financial statements. Another helpful tool is the cash flow forecast. An accountant can easily create one for their clients.
The video below offers an excellent, in-depth overview of preparing and understanding a cash flow forecast.
Get in Touch with WTP
The key to solving a cash flow problem is not "wait and see" what happens, hoping for a quick return to normalcy. Instead, be proactive and strategic, starting today.
To find out how this might work for you, Contact Us or call us at 559-251-8595.
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