Establishing Budgeted Hourly Rates

 

An essential tool for being a competitive and profitable printing organization is budgeted hourly rates (BHRs). Budgeted hourly rates distribute 100 percent of an organization’s expenses among each piece of production equipment so that all costs are fully absorbed and accounted for in estimates, price quotes, and job costs. Accurate BHRs which reflects true out-of-pocket costs help printing organizations intelligently and competitively price jobs.

 

BHRs are comprised of direct and indirect costs including wages and benefits, building costs, leases, equipment depreciation, repairs and maintenance, utilities, insurance, office supplies, production supplies, sales expenses, and other costs. These costs are then distributed among each piece of equipment using various formulas and accounting principles.

 

 

Annual expenses are then recovered by the production hours you sell to customers or "Chargeable Hours". Chargeable production hours is when equipment is producing billable work Makeready, running, washups, customer OK’s.

 

 

 

 

BHRs typically do not include job related consumables such as paper, ink, plates, packing materials, or outside services. These costs are usually estimated and charged separately.

 

Companies can calculate their budgeted hourly rates using spreadsheets or BHR software such as the Cost Rates Advisor www.costratesadvisor.com An organization should update their BHRs at least annually or anytime there are significant cost changes including equipment purchases, wage increases, personnel changes, increases or decreases in revenues, or other major cost fluctuations.

 

Maintaining current BHRs enables organizations to be more competitive on the desirable and profitable work, and avoids the less lucrative work.

 

If your organization has not updated your BHRs in the last year, you could be losing profits and missing out on the more lucrative higher margin quotes.

 

For more information about the Cost Rates Advisor www.costratesadvisor.com budgeted hourly rates software click here.

 

By: Craig L Press, President, Profectus Inc.