In previous posts, we have discussed where to find data to help water and wastewater systems make smart financial and managerial decisions. Another vital data source for any water and wastewater system is its own financial statements, from which systems can calculate key financial indicators.

Key financial indicators are a way for a system to get a snapshot of its financial health and to determine whether it needs to make adjustments to its rates, and they should be calculated annually when financial statements are released. One important financial indicator is operating ratio, which measures the ratio of annual operating revenues to annual operating expenses. To be a true enterprise fund that is self-supporting, a system should strive to have at least as much operating revenue as it has operating expenses, if not more. Otherwise, the system would be operating at a loss.

Continue reading