20 Financial Terms Every Studio Manager Should Know

“Until we have comprehensive financial education, we'll never see the end of our booms and busts,” Robert Kiyosaki

Managing a studio requires a set of skills and expertise in a variety of disciplines, (Oh yes! we have to wear many hats) one of which is financial literacy. Even when you are not running the full operation, you must have the financial knowledge that allows you to read and understand financial reports, get into a meeting with your finance team and be able to articulate at a professional level, adding value to the discussion. You must be able to interact (financially) with other departments and that requires a certain level of business acumen.

I've curated the list below with (in my personal opinion) the most widely used financial terms in the graphic studio business. We are already familiar with most of these terms, but I'm pretty sure this could help us to improve our financial literacy, hence making us more effective managers.
Accounts Payable
It's the money you owe to vendors and suppliers. Any pending invoices you have to pay for goods and services you have requested and received.
Accounts Receivable
It represents the money your clients owe you. You usually claim for it by the means of invoices, after delivering a service that your client has properly requested using a "Work Order" and a "Purchase Order." Accounts Receivable is only one of a series of transactions that are part of the processes involved in billing the client. It is legally enforceable if you follow standard business practices like estimating, getting estimate approvals, and requesting and receiving a purchase order.
Audit
It's an inspection done by an independent qualified personnel (outsiders) to a business financial statements to ensure the information represented is fair and true. The purpose of an audit is to provide an objective independent examination of the financial statements, which increase value and credibility to the way a studio is conducting its business affairs. An audit can be done internally and can also be requested by a client. It's a tedious process to go through, however, if the studio has been managed ethically and financially correct you should never be afraid of an audit.
Balance Sheet
It's the statement that summarizes the financial balances of your studio. In other words, it tells the financial position of your business at a determined point in time during a calendar year. The studio has its assets, owner's equity and liabilities, and like in any other business the equation remains the same: assets-liabilities=owner's equity.
Budget
A budget is the contemplated amount of money and/or resources to cover for a specific project, expenses, or activity. Budgeting is the best tool managers use to control expenses and resources.
Cost-to-Date
In our context, it means the amount of charges posted on a specific project at a given moment in time, it could be the end of the job or still a work in progress. It reflects all the resources expended on a single job and managers have to be observant this amount never exceeds the (PO) purchase order amount.
Estimate
It's an approximate calculation of the value of the services and/or goods requested by your clients. This is not a perfect science, however, experience will allow you to prepare more accurate estimates. Following historical data, using the proper billing codes and some common sense (ask questions when in doubt), will help a new manager to get on the right track while performing this important task.
Expenses
The economic costs that a business incurs in order to obtain gains or revenue. Any outflows of money in return for goods or service are an expense. Whenever the studio purchases material to be used on a project, pays or submit a voucher for a cab ride, buys food for the studio artists working on a late night project, a business-related airline ticket, etc., these are all considered expenses. Usually, when authorized to do so, an employee can pay for an expense out their own pocket and then submit an expense report to be reimbursed later. Payments to suppliers/vendors and salary wages to employees are also considered expenses.
Financial Ratio
It's a quantitative analysis made by establishing a relation between 2 different values from the financial statements. Financial ratios are the tools used by financial managers to read and analyze financial statements. They indicate how the business is performing in a specific period of time, however, they're useless if you have nothing to compare this data with. You can compare it with past performances (historic data) and/or similar business performances. There are several categories of financial ratios, but in this list we're only covering one of the profitability ratios: Profit Margin.
Forecasting
It's the analysis you make to foresee how much you'll spend and how much revenue you'll capture in a specific period of time. It's based on the use of historical data, good assessment/management of your client's expectations, and controlling your expenses. As a matter of fact a good forecasting must start with the expenses.
Invoice
It's a commercial document issued by the studio to the client after a project has been completed. It indicates the amount of money is owed to the issuer, specifications of the services rendered and the PO number backing up the work request. Invoices also have a unique reference number for tracking and security purposes. When the studio receives invoices from vendors and suppliers, these are considered purchase invoices.
Markup
After expenses and costs are covered in the price of the service you rendered or any goods you are selling, you add extra money to create the profit. This extra could be a fixed amount or a percentage of all the costs incurred in providing the service.
Operational Cost
Expenses associated with running a studio on a day-to-day basis are considered operational costs (see Expenses). For instance if you receive a request to print and bind 20 books and you purchase $200 dollars worth of paper, the $200 are considered an operational cost. However, if you only used half of the paper, then $100 is considered an expense while the rest go straight to your assets. This example illustrates the difference between cost and expense.
Overhead
Any business expense not related to direct labor or direct materials that are billed directly to your clients. For instance, rent, utilities, insurance, etc. Overhead expenses have to be taken into consideration when determining or adjusting how much should be charged for the services offered by the studio.
Profit
When the total amount of revenue exceeds the expenses, costs and taxes needed to run the studio operation, it's considered a profit.
Profit and Loss Statement (P&L)
It's a financial statement that encapsulates the revenues, costs and expenses in a specific period of time (this could be a quarter or fiscal year). The "P&L" is perhaps the most important tool to help you see the big picture of the "ins and outs" and to put a "plug" in some of the holes to stop the outs. In other words you can easily see which costs and expenses can be cut in order to make the studio more profitable.
Profit Margin
It's the percentage of the revenue that turned into a profit. It's a profitability ratio that you calculate dividing your net profit by the revenue. The profit margin is key information used by financial management to do forecasting and to revise pricing.
Purchase Order
It's a commercial document issued by a client to the studio, indicating the specifications of the services requested. A Purchase Order is issued after the client agrees with the estimate submitted by the studio and until it is accepted, the transaction is not considered contractual. We also submit POs to our vendors and suppliers in order to control the studio purchasing and services requested to external entities.
Revenue
It's the amount of money the studio receives for the services rendered and goods sold in a specific period of time. In an ideal scenario, the amount reflected on the invoices issued by the studio must equal the revenue.
Timesheets
It's the system used to record how much time studio artists spent on a particular job. Everyone knows what a timesheet is, but I'm including it in this list because in my personal opinion timesheets are the building blocks of the studio's financial structure. There's a reason why studio management is constantly enforcing the correct preparation of them, and CFOs and financial managers send email reminding employees to fill out their timesheets.Simply put, this is the way we bill the clients period.

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Ernie Arias is an Advertising Studio Manager at Hogarth WW. Social Media enthusiast. Dad, husband. Opinions are my own.

References.: Wikipedia, Investopedia, Reuters financial glossary and Yahoo.

7 Tips To Improve Your Workflow Management

As a Studio Manager, the last thing you want to see is a job circulating countless rounds or a project taking much longer than the estimated time, thus creating a bottleneck in your workflow and affecting your deadline. The ideal is a steady and smooth flow of jobs getting in and out period.

PROCESS

It doesn't matter how big or small your studio is, you need to have a process in place. All entities interacting and affecting your workflow must acknowledge this process. Otherwise, you'll have chaos and disorganization in your studio. There is a misconception about not implementing process because of the size of the studio and in my personal opinion it's just wrong. Process is the only way to guarantee a consistent result on similar tasks.

STYLE-GUIDE

Every account should have a set of guidelines. If you find yourself working on a new account and you don't have the style guide, it's time to create one. You should communicate to the Account and Creative teams of the need of a style-guide. They'll happily agree, because everybody benefits from having one. This ensures consistency on every job output from this particular account.

JOB LOG

Logging-in every job either manually or by means of a software (a database like FileMaker Pro is recommended) will provide very valuable data that can be used to assist you in future decision-making and planning. 

PRIORITIZING

To establish priorities is a no-brainer, but sometimes it can be very tricky. In my opinion, the client should be your number one priority. Jobs that require files to be sent to the client, mechanical releases or any production job in general should be considered a priority. Very often you'll get "rush" requests that in reality are driven by personal agendas—it's just something you have to deal with. 

THE BRIEF

This is probably the most important part of taking a job to the studio. So many jobs go to an unnecessary number of extra rounds due to a misunderstanding in the briefing. It's a good idea to have the studio artist taking part in the briefing. They usually have questions and the requester can answer them in the spot. At the end of the briefing, make sure everyone is on the same page about the task at hand. Make sure supplied assets are correct, FTP sites, copy sent via e-mail, etc., before the requester leaves, just to make sure that everything is in order and we'll be able to meet the deadline with no problems.

10-MINUTE RULE

After delegating a job to a studio artist, if he/she finds an issue, give them 10 minutes to figure it out on their own and if they can't, then they must bring it back to their manager, who'll take proper action either by finding a solution or by notifying the requester about the issue.

WATCH THE ROUNDS

It's a matter of great concern when a simple advertorial circulates more than 4 times. It's definitely a red flag and you should pay close attention to this. Identify the problem and take action. 


These workflow tips are specifically for an advertising/graphic studio. However, some of them can also be applied to other industries where workflow management is part of the daily work routine. I hope you find them useful. If you have any tips of your own, please share them with us.

Crowdsourcing On LinkedIn: What Does It Take To Be A True Professional?

“The true professional is a person whose action points beyond his or herself to that underlying reality, that hidden wholeness, on which we all can rely.” Parker Palmer 

Last October I started writing an article about the qualities of a true professional, and right in the middle of the first paragraph, an idea came to mind. I thought, "What if instead of writing it on my own, I do some crowdsourcing on Linkedin and pick up the brain of the many professionals on my network?"And that's exactly what I did and what a better place to do it than a discussion group. 

Of the many groups I've been honored with being a member, I decided on using the "Advertising Professionals" group because it has the largest amount of members in our industry. See the whole discussion on this link: http://lnkd.in/Qat9ma

As expected, I received lots of interesting insights from professionals of different backgrounds within the industry which helped me to come up with some bullet points about the essence of being a true professional: 

• You should never promise what you can't deliver. A true professional always under-promise and over-deliver. Once you lose your CREDIBILITY you'll never get it back.

• When you're a true professional your actions should never be motivated by personal matters. You must always bring to work your ETHICS 'toolbox.'

• You should never stop from doing what you have to do because 'this is not my schedule.' When a true professional is asked by his/her boss to do or work on something, you'll never hear the lame excuses 'it is not on my job description' or 'these are not my hours.' A true professional is a CAREER-ORIENTED, TEAM-PLAYER and RESPONSIBLE individual, who is always willing to give more than what he's been asked to do. 

• Effective COMMUNICATION is a critical skill in every professional. Communication is a 2-way path, so listening carefully and expressing your ideas, clearly, thoroughly, succinctly and accurately should be mastered by a true professional. Either when you're writing an e-mail, having a phone conversation or standing up in a meeting, clear and effective communication is a must. 

• True professionals are constantly motivated to learn and to keep that knowledge up to date, always fresh. They understand the importance of becoming an EXPERT in their field of work by keeping themselves up to date in the latest software, skills, tools, techniques, required to do their job.

• Indeed true professionals are models of what every company's code of conduct book says. As a rare breed they are, they'll treat everyone respectfully and pretty much the same way they expect to be treated. Especially when interacting directly with clients and costumers, either selling goods or as a service provider, the way you treat them will determine how successful your business will be. So certainly EMPATHY, COMPASSION, RESPECT and HUMAN RELATIONS skills are in a true
  professional's DNA. 

• True professionals, regardless of being in a position of power, are humble enough to acknowledge what is not known. They are also capable of admitting their mistakes because they are up-front and responsible individuals. Another HUMILITY signal is that no matter how good they might be, you'll never catch them neither gloating or in a self-praise, boastfulness speech. On the contrary, they'll give credit to whoever deserves credit and possess the best attitude to pass their knowledge to their peers.   

In a nutshell being a true professional is an attitude, a passion that emboldens you to do your work with unparalleled energy and contagious enthusiasm. It's way beyond salary and more about giving and serving. It's also about integrity, responsibility, commitment and trustworthiness. Unfortunately for some individuals, you can't fake any of these values, and that makes being a true professional a very powerful brand. A brand that anyone would like to be associated with.

Coaching and Mentoring: The Keys to Being a Successful Leader

 “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” John Quincy Adams

 
Coaching and mentoring are by far the most effective ways to build a team and become a successful leader. They create a strong connection between supervisor and employees by building trust and loyalty, simply because employees feel that they are being valued and appreciated by their supervisor and/or organization.

When an employee is working under the type of leadership that invests in their career advancement —a leadership that not only sets goals and objectives, but also gives clear directions and access to the resources they need to attain top performance— they become a highly motivated employee, and highly motivated employees are usually the most productive ones.

More Commitment and Higher Employee Retention

When employees are experiencing growth and advancement in their careers, it's extremely difficult for them to leave. Realizing that their supervisor cares, the feeling of gratitude for the newly learned skills, and the perception of “being part of the team” are all powerful elements that strengthen their commitment and increase the accountability on any given task.

Reducing Cost of Freelancers

It also helps you to bring everyone to the next level of skills, which in return will improve the quality of performance delivered by your team. In a very challenging job market, where good talent is scarce and expensive, you're better off investing time and resources in helping your staff to realize their full potential, rather than hiring an expensive freelancer. Just imagine the immensely positive impact in your ROI if you're able to reduce or completely cutoff the spending on freelancers.

In a work environment that's constantly changing due to technology and/or economy, quickly adapting to new situations is a must. If you are a manager these days, you're probably facing more work to do with less people to work with; or maybe you've been asked to stop spending on freelancers for the next two months, even though your workflow will not lessen during that period. This is the time when you look at your staff and wish you had two or three copies of your best performer; it's also the time for a reality check, and to start thinking about how easy it would be if your under-performers could develop to their fullest potential.

The Infamous Indispensable Man

Have you ever heard a business owner or an employee gloating about every time they go on vacation, their shop or office descends into anarchy and chaos? You can actually see how important and proud they feel when they're talking about this. Their ego is so inflated they're oblivious to the fact that there's nothing to be proud of. Nobody, absolutely no one, should be indispensable! And when we let this happen, it just means we've failed as managers.

There's a tendency with some insecure individuals, out of the fear of losing their jobs, to "mark territory" and keep a tight grip on certain important tasks that may require specialized training. This is a very common and harmful practice in the workplace and the way to avoid it is simple. As a manager or business owner you need to ensure your coaching and training programs are followed thoroughly as part of the process, never allowing individuals to come up with their very own "personalized system," i.e., user names and passwords to access vendors and client sites, when needed, must be available to anyone in the office.

In an advertising studio, we have individuals with different sets of skills and degrees of expertise. It would be almost impossible to have a studio full of know-it-all, Jack-of-all-trades studio artists, but what you can do is to motivate and coach the team so they can strengthen their weakest skills by supporting them with the proper training. So when your best production artist is out, your designer can handle the task of producing a mechanical.

Leadership is about giving and sharing knowledge, which is the most precious asset anyone can possess, with the only difference that whoever gives knowledge is not losing a bit of it, and this is a beautiful thing. An organization with a structured coaching and mentoring programs would not suffer much if one of the key employees decides to go on a long vacation or leave the company, and periods of transition, i.e., promotion or succession, will go really smoothly.

Delegation, The Power To Empower

By Ernie Arias

"I just do what I'm really good at, to delegate. The rest I delegate it." @ERNIEARIAS twitted on July 14th, 2011.  https://twitter.com/ERNIEARIAS/statuses/91704449155862529

My first gig as a studio manager was about ten years ago. A responsibility I earned because of my work ethic, outstanding skills as a studio artist and an excellent interaction with my co-workers as well as with the Traffic Coordinators, Editorial, Print Production and Account personnel. Pretty much everyone agreed I was right for the position and I was very excited in taking this new challenging opportunity. However, today I look back and realize how 'green' I was, regardless how super-talented I might be.

I still remember my first week as being such a traumatic and stressful experience, because either I wanted to do everything myself or at least be involved in it more than I needed to be as a supervisor. There I was, completely out of my comfort zone and as someone else pointed out, "I found myself distrusting my piers," the very same individuals I've never judged or distrusted before when I was not a supervisor. On the contrary, they were all excellent professionals and we had a very strong studio process in place plus a newly created quality control unit. As a matter of fact, there was no rationale that could have possibly explained my behavior. So what was wrong? What's happening?

My problem was very simple, I was not delegating as much as I should. It took me a while until I was able to adjust to my new responsibilities as manager and learned to delegate effectively.

The Big Picture

Delegation is probably one of the most important skills a studio manager must possess and it's as simple as assessing the job requests, dealing with priorities and distributing the workload among your staff (and freelancers), always following the cardinal rule of not doing anything that doesn't absolutely need to be done by you. It's very easy to fall in the trap of creating a work overload on your desk if you don't delegate effectively, especially to those who are very skillful and can take care of any task as good as any studio artist or even better. You need to focus in your task as a manager in order to maintain control over the workflow, priorities, process and quality of the final delivery. You must sit down on the 'Captain's chair' to be able to see the 'big picture' and ensure the operation is running smoothly, as well as to identify, anticipate any potential problem and take corrective action.

Building Trust And Empowering Your Staff

By delegating, assigning important tasks, you build trust and create a sense of ownership and empowerment among your team. Trust is essential to leadership and team building, and also to earn respect beyond your appointed position. Good employees are very observant of the manager's ability to delegate and when they sense they're not being utilized as much as they can perform or to the level they can perform, they simply feel themselves as not being trusted, hence a bit demoralized. They can also misjudge the manager as not being confident or even worse, holding a heavy workload on your desk might also be misinterpreted as territorial protection.

The good news is that delegation is a skill, and as any skill it can be learned. Not surprisingly, there is a very tight connection between your title and your ability to delegate. The higher you climb up the corporate ladder, the more refined and effective your delegation skills must be.

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If you've made it to this point it means you read this article. Awesome!! Your opinion is greatly appreciated and if you like it, please use the share buttons to spread the word.
Thanks,
Ernie Arias

Studio Procedures and Deadlines: Walking The Tightrope

By Ernie Arias

"To manage a studio is not enough to walk the fine line between business and service, yet stick to process. We also need emotional intelligence." Ernie Arias on Twitter 7/8/2011
https://twitter.com/ERNIEARIAS/statuses/89435174877659136

Small graphic businesses, design firms and some boutique agencies are not as complexly organized and well-structured as a large advertising firm. This becomes more evident when it comes to creative services and more specifically the studio. Many of these organizations don't even have a studio but instead a unit where graphic designers, art directors, retouchers and producers converge and everyone is a "Jack-of-all-trades," multifaceted and super-qualified employee. Camaraderie, proactivity and team work are always present, and this might be the perfect environment for creative ideas to flourish in. However, you can also find a bit of disorganization; lack of structure and procedures, which affect the workflow and billing system.

Several books, articles and non-traditional media about BPM (Business Process Management) have been written and pretty much all of them agree on one thing: the main reason for having or creating management procedures is to guarantee consistency in delivering a product or a service. There is a popular saying; "measure it twice and cut it once." I am going to use it as an analogy. In our case, it would be "follow the process and you only have to work once."

Standard Studio Procedures
Standard studio procedures have been created out of learned experience and most of the time are based on trial and error, by what is demanded on a particular situation in a specific moment, with means that have been proven to be effective. Procedures prevent errors, streamline the work and guarantee consistency, regardless of who is working on any given job. So it's very important to watch out for those requests to avoid studio procedures because they will compromise the deadline. Be tactful and convey to requesters how important it is to follow the process. Ask them about the possibility of extending the—deadline because if something goes wrong, there's always going to be time to fix it.

There are some procedures common to every studio, but I'll just mention 3 of the most important ones:

• Proofreading—Every job routing out of the studio needs to be proofread. You should never, ever buy into "No, it doesn't need to be proofread. It's just internal." Or "We don't have time to proofread the document." Well, I've got news for you. As a studio manager, you're accountable for any misspelling errors if you go along with such an irresponsible attitude. My recommendation is to either greek the copy or place a watermark across the document with something like "DOCUMENT WAS NOT PROOFREAD, AS PER REQUEST. STUDIO IS NOT RESPONSIBLE FOR ANY MISSPELLING ERRORS." This will definitely deter any requester trying to avoid proofreading.
• Flight-check and Quality Control—Every completed job going to a pub, a vendor or any digital/web material needs to be checked thoroughly prior to release. Studios are the final destination of all the laborious efforts made by the rest of the teams. We are the last line of defense, hence the need to create a robust QC process. Whether created with cutting-edge technology or manually, every job going out has to be perfect.
• Routing Signatures—Slugs are a standard medium to route jobs throughout the agency and there's a signature box in it for everyone responsible for overseeing each round. It is imperative that everyone involved sign off on every single round to prevent an excessive amount of rounds and to increase accountability. With today's digital technology, there shouldn't be excuses for not routing a job to all parties involved. When an editor, a proofreader, or a studio manager address some issues about a job on the routing printout, those queries require the addressee's attention. It is very frustrating when a job routes back to the studio with unanswered queries.

No Procedure Is Set In Stone

Every studio has its own personality and for that reason it needs its own customized directives, based on industry standard procedures, to be able to function and engage seamlessly with the rest of the agency. Procedures are meant to streamline, to ensure quality, to increase accountability and, as I mentioned before, to ensure consistency in your output. It's a very well discussed and thorough process before you establish a determined procedure but the reality is that a new technology (software or hardware), a new client, or even the economy can trigger a revision in your current process. It's not a perfect science but it helps immensely in our quotidian management routine!

I hope you've enjoyed the article. Please post your opinion. Comments are greatly appreciated!!
EA
 

Breaking the Laws of Physics or Meeting Impossible Deadlines

I was recently reading a post from Liz Resko in the LinkedIn Studio and Print Production Manager's group (ASPMLINK). It was about what a Studio Manager can do to enforce deadlines. All the comments, from the really complacent ones which saw it as the norm for the Studio to not get enough time, to the process-oriented opinions, missed the point, until Liz intervened again and explained she was not referring to her own unit, but instead to other departments "dropping the ball" and putting the burden on the Studio.

It was very interesting to notice that many of the good suggestions focused on improving communication at all levels, from developing good relationships between departments (internal) and between Studio and Vendors (external).

In Print Production it is very important for the Studio to have close communication with the Producers, briefing on big projects and launches; a robust process and workflow supported by high-end technology (Dalim Twist and Xinet); Monday Status meetings, and CSR-quality relationship with Pubs and Vendors. There is so much control in your hands when dealing with print production, you know exactly what to expect because everything has been previously scheduled, and having Print Producers that know how to manage their projects (upstream, creatives and account) is an absolute godsend.

On the other hand, the Creative Development process is a bit more complicated. This is where you find the personal-agenda kind of deadlines ("My friends are waiting for me at the Pub"); the "I forgot to send you the new copy" (Really?! Just if they're honest enough to admit it), or the classic "The creatives are still working on the files." And instead of bringing the material on time, it comes to the Studio an hour after, and to top it off, the requester asks you candidly if they can make FedEx or have everything ready for their 8:30 AM presentation, after we've already discussed how much time the Studio needs for turnaround. It is as if the Studio can break the laws of Physics and expand time and space at our will.

In conclusion, it is everyone's responsibility to make sure deadlines are met. We all must be aware of the consequences of missing an ad insertion or not sending a PDF to the client on time; there should be accountability in every step of the process. In a nutshell, communication is the key to accomplishing a smooth operation between departments and like my ex-boss used to say, "First we need to fix our own problems. We need to be 'buttoned-up' before we can demand or complain about another unit's problems."

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If you've made it to this point it means you read this article. Awesome!! Your opinion is greatly appreciated and if you like it, please use the share buttons to spread the word and subscribe.
Thanks,
Ernie Arias