Improving efficiency isn't necessarily about unlocking more resources for your credit union. It's about taking the ones that you already have and extracting as much value from them as possible.
This is why efficiency ratios are key. They help assess how well a credit union is utilizing those resources in the name of generating more income and better serving its members across the board. Improving the following seven key ratios will go a long way towards helping your own organization with precisely that.
1. Aligning Your Technology With Your Organization
Leveraging scalable technology solutions is one of the best ways to make sure that your infrastructure properly aligns with your larger goals as a credit union. When you invest in new technology, find solutions that can seamlessly scale as your organization continues to grow. Likewise, choose flexible solutions that can easily adapt to changing member demographics and needs.
You should also focus on optimizing your technology investments by regularly exploring newer, more efficient solutions that improve upon the ones you already have.
2. Operating Expenses Over Average Assets
To improve this ratio, start by leveraging automation whenever you can. Identify manual processes that can be automated and do so, thus reducing costs wherever possible. The money you save can then be allocated elsewhere in your credit union where it can meaningfully improve the member experience. That will ultimately help you gain more members, which increases revenue moving forward.
3. Members Per Employee
Keep in mind that a high "members per employee ratio" could be an indication that your credit union is efficient and effective. It could also mean that your people are overextended. So focus on improving operational efficiency to improve this ratio in the right way.
4. Loan Origination Per Employee
Choosing the right core credit union system is the best way to increase loan origination per employee. It can help you see how your credit union is functioning and what needs to be done to improve your metrics.
5. ROA
Reducing the cost of your credit union's group health plan is one of the best ways to improve ROA. One credit union was able to reduce costs by more than $1.2 million and increase ROA by 24% in one year by looking at this and a few other factors.
6. Net Income Per Full-Time Employee
Prioritizing employee development, investing in technology and automation, and aligning employee skills with responsibilities are all ways to improve net income per full-time employee.
7. Cost of Technology Per Member
To reduce costs in terms of technology without reducing quality, make sure that your credit union isn't paying for more than it needs when it comes to cloud resources. Consider consumption-based contracts whenever possible and don't be afraid to switch hardware or software vendors if they offer a better deal or higher level of ongoing support.
Discover the Power of Core Technology Efficiency
At FLEX, we're big believers in the idea that your ability to increase revenue and save money for your credit union is directly tied to the efficiency of the core technology everything is built on. We've written an eBook that dives into more details about these seven key ratios and other related topics. To download your copy today, click the button below to get started.
