Financial Profile
Financial Baseline
Understanding the financial flows and cost recovery is critical for any paid service. Typically, LA accounting does not use a profit and loss approach, with operational, disposal and income numbers sitting under different cost codes.
The Cost Stack
By combining all the costs in a simple financial model, it is possible to explore the cost recovery performance of each waste stream, which in turn can inform price setting strategies. A financial model is available upon request to help your profit and loss position.
Common areas that may be overlooked when establishing a profit and loss model are the overheads required to support the service, such as:
- Proportion of bad debt carried.
- The true costs of the resources or vehicles which are shared with household collections.
- Supervisor and management input.
- Container delivery crews and stocks.
- Wider support such as corporate overheads, legal, call centres.
- Disposal and treatment gate fees and processing costs.
All need to be considered and proportioned for incorporation into the profit and loss position.
As LA fees and charges can often follow a corporate mandate, it is common for commercial waste prices to increase by a set amount each year. Yet operating costs, recycling income and gate fee can vary significantly over time and price setting may require a more tailored approach.
Having a robust profit and loss financial understanding can not only inform a path to full cost recovery, but it can also support invest to save proposals and business case development.