Chargeback to the Future

A chargeback system can help an in-plant acquire the latest technology, improve service, grow business and secure its future.

By Mike Renn

Why charge back? Wouldn't time be better served selling services, justifying equipment or working on process improvement?

Wouldn't an across-the-board allocation of an in-plant's operational expenses be simpler? There would be no worries about cost recovery or justifying the operation's existence. Leave chargeback to the entrepreneurs. Correct?

Don't bet the shop on it. You'd lose it.

Even in-house printers that currently utilize a chargeback can learn how to better leverage the benefits of this billing system.

A chargeback system can help the in-plant manager acquire the latest technology, improve service, grow business and secure a future for the in-plant. Before we explore the future, though, let's go back to the past.

Fight or Flight

'Free' Printing? Guess Again Having no chargeback system does have a few benefits. It sure cuts down on paperwork. And who needs to market when customers think your printing is "free?" The word free, however, is used loosely. Someone is paying for it. The more successful the in-plant becomes the larger the target it makes. This "free" leads to irresponsible and unnecessary printing. This is natural and inevitable. No price tag equals no restraint. With no chargeback system it is harder to track the culprits. The result is the print shop budget becomes very noticeably bloated. When budget fat needs to be trimmed guess the first place officials will look? Performing virtual chargebacks or creating standards, restraints and recommendations for use of services can help safeguard the in-plant and still maintain the "free" status. Virtual chargebacks involve knowing your customers' workflow and cost. It's just like a chargeback, except you don't bill it back, but retain the data to help improve service, reduce expenses and ward off budget cuts, or worse. If virtual chargebacks are a little too much homework, then I recommend at least using standards, restraints and recommendations. Remember, there are a lot of people out there eyeing your work, both inside and out. Free doesn't prove efficiency. Often free is viewed as suspect. What's wrong with it if you're giving it away? Isn't free less than cheap? Isn't cheap associated with low grade? People often adopt an "if it ain't broke, don't fix it" attitude. But in our business it's better to "improve it, before the wheels fall off." An in-plant with a well-constructed chargeback system can supply measurable and indisputable proof of how much it is saving the corporation. It can show real numbers.

Several years ago, I was traveling to our corporate headquarters. At the time, my company had a corporate air shuttle. It was a plush little 16-seat aircraft that looped between Philadelphia and Pittsburgh daily. Normally, it was full, but that day there were only two of us aboard. We struck up a conversation—rather, the other occupant did. He was new and excited about his job. His position in the corporation was almost as high as the aircraft's altitude. Still anonymous to my verbose fellow traveler, I listened.

"…And the first thing I'm going to do is get rid of all those in-house print-shops," said the new head of purchasing.

I was tempted to open a window.

Finally, my companion asked what I did.

"I run the in-plant print facility in Philadelphia," I replied flatly.

The longest, quietest 30 minutes to the ground followed. All the while, I was sure he was planning his strategy to dismantle my operation, as I was thinking of how to preserve it.

I was wrong.

The demolition crew was already in place. My fellow traveler had brought in his own team, changed purchasing to sourcing and was ready to sign a contract with a print facility management firm. This sorcerer and his apprentices firmly believed that everything that wasn't core to our business should be outsourced.

Measure Efficiency

"In-plants are costly and inefficient," defenders of the core and opportunists proclaim.

Without a chargeback system you can't effectively prove otherwise. Even if your in-plant is doing a good job, if you have no means of measuring how good a job, chances are its doors will be closing.

With zero chargeback, you will suffer the fate of the fast FM formula. This new math seems very logical to decision-makers, because it always results in the same answer. FM goes into corporation minus in-plant.

A zero chargeback in-plant looks costly because it assumes all the overhead cost and is inefficient at proving its efficiency.

An in-plant that allocates or spreads its operational expenses evenly across the company will also have problems refuting this dangerous allegation. It fact, there is a good chance it will prove the statement. Of course, it will be able to show that it recovers cost of operation, but this socialistic way of divvying up its budget is unfocused and doesn't even lend itself to self-analysis. Occasional users of the in-plant will be charged the same as frequent customers.

Only The Best Will Do

Without job-by-job chargeback, customers dismiss limitations on requests. The best paper, the most colors, the highest quantities will be specified. Expensive and unnecessary printing will result. It wouldn't be hard for someone to convince upper management that this in-plant is costly and inefficient.

Having a good chargeback system can quickly debunk this empty claim. The best kind is one that includes all overhead expenses, both direct and indirect, and bills them back fairly on a per-job basis. Any doubting Thomas merely has to check with finance to verify whether the in-plant is carrying its own weight. However, as stated with the allocated in-plant, cost recovery doesn't always equate to cost efficiency.

An in-plant with a well-constructed chargeback system can supply measurable and indisputable proof to its response. It has already compared itself to the competition. It knows how much it is saving the corporation. It can show real numbers. Provided it has a high level of customer satisfaction, the in-plant that can show cost recovery and provide services cheaper than its competition proves to be cost efficient. The numbers are what the numbers are. No slight of hand need be employed.

Is justifying the existence of an in-plant enough?

Define Your In-plant

A chargeback should be more than just a method to recoup operating expenses and assure the in-plant's survival.

Creating and honing this system can lead to self-discovery. Through the process of determining rates, analysis of your current job mix and comparing it to your competition, the in-plant's strengths and weaknesses can be revealed. Don't be afraid of what you might discover.

Maybe, the work you are accepting now might not be what your in-plant is best equipped to produce. Maybe, the savings to your company are negligible. Streamline the operation. Move to the strengths and steer away from the weaknesses. The chargeback will help define your niche.

Don't pat yourself on the back so fast. There is more work to be done.

Justify Equipment

Look to improve services. Focus on what is important to your company and troublesome to purchase outside. This is the type of business that will garner the highest savings.

A good chargeback system gives you the tools to pursue this new work and acquire the technology needed to produce it. Knowing the mechanics of pricing, the in-plant manager can create rates for proposed technology, apply them to desired business and compare the pricing to the competition. If the savings are substantial enough to guarantee return on investment of the new technology in one year, there is a good chance the equipment will soon find a home in your operation. It can be that simple.

Why stop there?

Grow Business

The ability to bid on printing that a proper chargeback system offers, increases the in-plant's chances of growing business.

Professional print buyers prefer professionalism. An in-plant that can quote consistently like the best outside print providers gains credibility. If the in-plant can deliver what it promises, buyers will reward it with increased business. They will appreciate the ease of use, the reduction in invoice processing and immediate savings in sales tax.

Casual customers can look like heroes. When in-plants know their costs, they can offer recommendations that can reduce expenses, while meeting or exceeding customer expectations. The clients can report triumphantly back to their managers with the savings. This is impetus enough to send more business.

Which bring us to reports.

Report Value

Why not report to upper management? If your in-plant is operating like a fine Swiss watch, it is about time you communicate with decision-makers. Otherwise, one ticked-off customer could be enough to bring the operation to an untimely end.

A chargeback system can help. The data is already there. After you use it for billing, why not report on the savings… or how about new revenue?

Be the Competition

Having a credible chargeback system opens the possibility of insourcing business from the outside. Check with your legal and tax departments to see if it is feasible.

Bringing in outside business can lower the cost to your internal customers, fill in the production valleys that go along with on-demand printing and drastically decrease operating expenses.

Charging Forward

As for the sorcerer and his apprentices, they open-mindedly weighed our finance-supported numbers against the tired, baseless rhetoric of the FM. The result was an influx of business into the in-plant facility.

That was in the past and I'm moving towards the future with my chargeback system.