Utility Finance Basics

Utility Finance 

In times of recession and uncertainty, it is important to focus on building your utility finances. With the significant fluctuation in the prices of utilities and a decrease in customers, it has become imperative for companies to have a reliable infrastructure in place. For larger businesses, this can translate into substantial cost savings, as well as increased revenue. If you are a business owner or manager, you need to develop financial strategies that include the building and maintenance of your utilities – including water, gas, and electricity.

 

Water and utility budgets for businesses

are quite different than personal budgets. A major portion of revenue for utilities comes from your customers. For businesses, water and sewer lines must be regularly monitored, maintained, and repaired to keep your accounts balanced. When you build a reliable and efficient customer base, your company will experience increased revenue. Additionally, with the increase of demand, the reliability of utilities also increases. Your customers can expect their services to be fully operational if you implement efficient utility finances and upkeep.

 

By tracking your utility finances

you can identify improvements that you can make to your infrastructure needs. You can also examine your expenses, determine what areas you need to improve upon and implement changes that can help you save money and improve the efficiency of your operations. For larger companies, analyzing your company’s infrastructure needs can be the first step toward reducing your costs. These numbers can also be used to determine where savings can be made. To address infrastructure needs, most cities require utilities to be hooked up to the community.

 

As stated above, utility finances

are based upon the collection and regulation of your utilities – including water, gas, and electricity. To improve your water and electric bills, you need to properly account for usage and the amount of time your fixtures are left idle. For businesses, preparing your financial statements and having an annual audit by a third party will ensure you properly structure your reserves and finances to meet your customers’ needs.

 

If you have a large business

your utility expenses will be extremely high, which means your returns will be lower than your expenses. To improve the profitability of your operation, you will need to take a close look at your ratios. Among the ratios to focus on when it comes to your utility finances are the customer recovery ratio, reserve/equity ratio, and the ratio of revenue to cost of service. By closely examining these ratios, you can see which areas require improvements to improve your bottom line.

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