The Importance of Being Exact

Suppose someone told you that the tallest mountain in the world, Everest, was 29,000 feet tall? Would that impress you? Probably not. The speaker’s knowledge of mountains sounds vague because the height sounds like an estimate. But what if they said that Everest was 29,002 feet tall? The credibility of the speaker is enhanced because the figure is exact.

The first modern height of Everest was made in 1856 by Andrew Waugh using data from the great Trigonometric Survey of India (1802-1857). Using the best tools of the day, dozens of measurements were averaged together to come up with a final figure of… exactly 29,000 feet.

Realizing that 29,000 feet would sound like an estimate, Mr. Waugh arbitrarily added 2 feet to the final figure. That measurement was the “the exact height” of Everest for 99 years until 1955 when better equipment and methods refined the figure to today’s 29,029 feet. So exact is a relative term, but the concept of being exact is what’s important. And being exact applies to running a theater or any business. Here’s how…

1. Be exact with cash. Your managers should not have mis-counts that are discovered at the bank, be in the habit of rounding to the nearest $1, leave tills for the next manager that are not what they should be, etc. The tills should be say, $200, and the bag drop should be, say, $2,482.75. Exactly. Amounts different from your POS should be explained as best as is possible.

Differences do and SHOULD occur. Any manager who is always, always perfect with their cash must be fudging. And you as owner or general manager should look at how much each manager is off every week or month. Not to accuse, but to know who’s good, who’s too good, and who needs improving. Good cash management should result in a maximum error of one-tenth of one percent vs. what the POS or register says, that’s $10 off per $10,000 of sales.

2. Be exact with inventory. This refers to both ticketing and concession inventory. Ticketing inventory means that if the POS or your reels of tickets show 89 people in the theater, there are 89 people in the theater. A couple off is not unusual due to bathroom breaks, theater hopping, etc., especially in teen movies, but if there are 78 in the theater rather than 89, it’s time to look carefully at the possibilities, 2000 pounds of flesh is not hiding under seats.

Doing a correct concession inventory was the subject of the July 2013 Theater Owner’s Edge here and I will not repeat the boring details. Most important: If a product is not accounted for in your inventory – it didn’t go through the register and is not in the spoil box – it went somewhere. Assuming your inventory counts are correct, in order going up of severity of your problem, the product was:

a. Mis-rung on the register; in this case another product should be over in the inventory
b. Eaten by an employee
c. Given away by an employee
d. Sold by an employee for the full retail price and the cash put in their pocket.

Notice that the product grew legs and walked out the door is not on the list of what could have happened. Over the course of thousands of dollars of concession sales errors do accumulate, but you should be within ½ of one per cent accounted for, that’s $50 off per $10,000 of sales.

3. Be exact with Labor. Your employees should punch in and out on time according to a posted, emailed, or online schedule. Work to the nearest 15 minutes. If your first evening shows on a Saturday are at 6:45, then the three evening employees coming in should punch in at, say, one at 5:45 and two at 6:00. Same with punch outs. Last shows at 9:30 might mean all except your closer clean up and punch out by 10:15. If three non-manager employees Mon-Thu and six non-manager employees Fri-Sun punch in 15 minutes early and leave 15 minutes late, that’s $140 extra spent per week on labor, matching social security, and workmen’s comp. That’s $602 per month. Are you OK with taking six one-hundred dollar bills from your pocket each month and shredding them?

Give employees a little room for error; say 5 minutes, but if they are regularly more than 5 minutes early then they should wait to punch-in and if they are regularly more than 5 minutes late then they should be reminded the purpose of the time clock.

4. Be exact with your accounting. Pretend for a moment that you are a state sales tax auditor and have been sent by your state’s revenue department to audit the theater’s sales tax payments. Standard practice when auditing small business sales tax is to audit for a three year period, but only do a detailed analysis of six months to one year chosen at random. The amount of error is then multiplied by six or three, unless the owner wants the auditor to hunker down and do the whole three years in detail. Guess which option most owners choose!?
You as an auditor will want to work directly from reports that are generated by the point-of-sale computer or a cash register. You will be suspicious of handwritten box reports or Excel spreadsheets that were produced downstream from original sales records.
OK, now stop pretending and start worrying. Will your tax payments match what the POS, cash register or original paper reports generate? Are you correctly backing the tax out** of the round figure that you are charging the customer? The auditor will probably want to glance at your operation in action—especially the cash part. Does everything look and feel right? That means cash doesn’t go anywhere other than the register and, preferably, sales don’t take place other than at the stand or box office. Look at your operation with outside eyes.

** Call me on this if unsure of the detail here.

There are more audit strategies than this, but no worries if everything is on the up-and-up.
Final sales tax thought. Are you paying the use tax (the out-of-state version of sales tax) on items you purchase from small out-of-state vendors that do not file returns in your state? If you aren’t paying the use tax on these purchases on your monthly or quarterly sales tax return, you will be—with penalty and interest—by the end of the audit.

5. Be exact with your picture and sound. The picture should be dead-on in-focus, it should not be striking the masking by more than 1-2” and the port glass should be clean. Easy stuff.
Sound can be trickier; the frequencies should be mixed correctly coming from the audio processor so that voices (especially female) are clear and crisp. Your system should be mixed so that when the voices are “right”, the sounds effects are not way too loud. This can be a challenge with action movies; the effects are meant to be loud.

Getting the sound right requires a person who knows sound and has a real-time audio analyzer. RTA’s are now available from the App stores, but they still require a good sound guy. Call your local guitar shop if you don’t know a person. Ideally, each movie should be mixed according to the specs that come from the studio, but this almost never works. The specs either don’t sound right on your system and/or you justifiably won’t bother to do it. Get a good local sound guy who drops by your theater now and then and uses those two things on the side of his head to make sure your sound sounds good.

6. Be exact in your whole operation. What does that mean? It means you run a tight ship. Your employees look neat and sharp. Your restrooms are clean. Your theaters are regularly swept and mopped. The popcorn kettle is cleaned as per the manufacturer, not when it gets so gunky it won’t turn. Your critical equipment has service numbers attached to the equipment with a label-maker. The website and phone message are always correct. Details, details, details. If you care, your employees will care.

You do this not because you are OCD—though you may be, but because little things add to big things and that gives your theater a tailwind-to-profits. Do things slipshod and you will be fighting a headwind for profits.

And the best part?—unlike the movies you show, this is all within your control.

Categories: General.

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