ECR and Operating ratio

What is ECR? It shows how much expenditure is covered by the revenue earned by that unit

Value can be less than 100 or more than 100

If <100: revenue is less than expenditure. (Loss)

If >100: revenue is more than expenditure (Profit)

Why needed? Is a measure of profitability or loss

If each unit earns as much as it spends, deficit can be wiped out

Puts focus on unit level profitability

Helps sensitize staff towards earning potential of each office.

Financial Management - Objectives

To achieve the ideal operating ratio/ Expense Coverage Ratio:-

◦ By controlling/minimizing the revenue expenditure,◦ By achieving revenue targets and preventing the Revenue pilferages,◦ By maximizing the revenue collections/ recoveries from other organizations for

the services rendered to them,◦ By properly implementing the opportunities of new schemes/services

introduced from time to time.

How to calculate ECR?

Sale of postage stamps/stationery 100%

Postage in cash, unpaid article amount, franking machine amount

100%

Money order commission 100%

IPO commission 100%

Telephone bill Total no of bills collected x Rs.5/-

GEB Total no of bills collected x Rs. 5/-

SB account Rs.175.46per live account yearly

SB account Rs.26.61 per silent account yearly

KVP/NSC certificate Total No of certificate(issue/Discharge) x59.95

IVP certificate Total No of certificate (Discharge) x 15.88

PLI 7% of premium collected

RPLI 10% of premium collected

Railway/telecom pensioners Rs. 80/- per payment

EPF pensioners Rs. 53.6 per payment

Total income of the Post office:

How to calculate ECR?

How to calculate ECR?

IMTS Rs. 260 per transaction

Post box/post bag rent 100 %

Post office quarter rent 100%

Advertisement income 100%

Exam fee income 100%

MO/VPMO from /sale of AD income 100%

Issue of identity card 100%

Sale of old records 100%

Speed post revenue 100%

Sale of gold coin 4% of Total amount Sold

Judicial/non judicial stamp 3% of Total purchase (for HO only)

Sheetal alovera sale 30% of Total sale

Any other income which are not included above

100%

Total income of the Post office:

Cont….

How to calculate ECR?

Expense Coverage Ratio ECR = Net Revenue receipt x 100

Net Working Expenses

Where :

Net Revenue receipts = Gross Revenue receipts (-) Refunds; and

Net working expenditure = Gross working expenditure less depreciation and recoveries.

Figure of more than 100(ECR )means a profitable state of business

Operating Ratio

Operating Ratio = Net Expenditure

Net Revenue

Where : Net Revenue receipts = Gross Revenue receipts (-) Refunds; and

Net working expenditure = Gross working expenditure less depreciation and recoveries.

Operating Ratio of less than 1 indicates profitable state of business.

Exercise

Calculate the ECR for your office with the help of information brought by you.

Thank You