Key Financial Metrics for Job Shops and Machine Shops
Metrics are a key part of managing any job shop and tracking financial health. You want enough metrics in your financial dashboard to keep the pulse of what’s going on, but not too many. Too many metrics can be time consuming to enter, but even if you could automatic them — they can be overwhelming. So I’m putting together a series of infographics that explain the best metrics for job shops and machine shops.
These are the same metrics we use in job shop scheduling for Velocity Scheduling System.
The first infographic is on what I believe to be the most important key financial metrics for job shops and machine shops. There can be exceptions, like if you have a cash issue, it might be better to look at your 13 week cash forecast and your cash to cash cycle time. But for most, tracking your Throughput versus your Operating Expense is the key financial metric. And, that’s because it’s a way to track your profitability.
Dr Eilyahu M Goldratt did remind us in The Goal, that the goal of any (for profit) company was to make money. Later he extended it to “make money now and in the future”. After working with Dr Goldratt and practicing Throughput Accounting, I developed this financial performance metric (Throughput vs Operating Expense). And we include it on all client financial dashboards.
You can NOT do this metric using your Profit and Loss statement. You’ll need to change a few things — but it’s totally worth it. Traditional P&L statements include allocations of costs into Cost of Goods sold. We’ll need to make a few adjusts to get a clear picture of the margin your generating (Throughput) versus your cost (Operating Expenses).
The details of what to do are explained in this infographic:
Key Financial Metrics for Job Shops:
The Top Financial Dashboard Metric for Custom Job Shops and Machine Shops
For additional information on KPIs and Dashboard for Jobs Shops <– click here.
By Dr Lisa Lang
This article is copyrighted by Science of Business, Inc.