Cash & Liquidity
Revenue Coverage of Fixed Costs
Extent to which collected own revenue covers salaries, bulk purchases and debt servicing.
Why own revenue must cover fixed costs
Salaries, bulk electricity and water purchases, and debt servicing are largely non-discretionary; if collected own revenue cannot cover them, the municipality is structurally insolvent regardless of its reported surplus. This coverage ratio is a frontline test of the going-concern assumption that underpins MFMA budgeting and AGSA audit opinions. AuditPro Core measures collected own revenue against committed fixed costs so liquidity risk is visible before payments are missed.
The Numbers
AuditPro Core renders this view from your tenant's live, tamper-evident records. The figures below are illustrative sample data.
Own Revenue Collected
R 1.41 bn
Fixed Cost Commitment
R 1.58 bn
salaries + bulk + debt
Coverage Ratio
89%
▼ below 100%
Funding Shortfall
R 170 m
▲ R 41 m
Revenue vs fixed-cost components (R m)
Fixed-cost coverage breakdown
| Component | Amount (R m) | % of Revenue |
|---|---|---|
| Employee costs | 712 | 50.5 |
| Bulk electricity & water | 604 | 42.8 |
| Finance charges | 264 | 18.7 |
Figures shown are illustrative sample data for demonstration. AuditPro Core renders these views from your own tenant's live, tamper-evident records.
Fixed costs are unavoidable
Salaries, bulk purchases and loan repayments must be paid on schedule and cannot easily be deferred. They are the true floor a municipality's cash flow must clear every month.
Collected, not billed, revenue counts
Only cash actually collected can pay fixed costs. A healthy billed surplus is meaningless if collection rates leave the bank account short.
Coverage below one signals distress
When own revenue covers less than the full fixed-cost base, the gap is plugged by grants, creditors or reserves. Sustained reliance on those buffers is a path to default.
How AuditPro Core Bridges the Gap
- Coverage computation: collected own revenue is measured against committed fixed costs each period.
- Liquidity alerts: continuous monitoring flags months where coverage falls below safe thresholds.
- Cost traceability: the fixed-cost base ties back to payroll, bulk-purchase and loan ledgers.
- Scenario view: coverage trends expose the structural gap grants are quietly filling.
Key Takeaways
- Fixed costs are the non-negotiable floor that own revenue must clear.
- Measure coverage on collected cash, never on billed revenue.
- Coverage below one means buffers are funding core operations unsustainably.
- Persistent shortfalls undermine the going-concern basis of the financials.
See This on Your Own Data
AuditPro Core renders this dashboard from your tenant's live, tamper-evident records — every figure traceable to source.