Cost per transaction is an important measure of a service’s efficiency. As services become more efficient, the cost per transaction will fall.
What you will be measuring
Cost per transaction is about how much it costs government to provide each completed transaction.
You should measure the difference in the cost of the transaction through each available channel. Understanding these costs will help you to accurately forecast savings and build a strong business case for making services digital by default.
How to measure cost per transaction
- Work out the total cost of providing the service.
- Divide the total cost of providing the service by the total number of completed transactions.
The total cost includes all fixed and variable costs of the transaction through a given channel, including overheads. It does not include start up costs.
Where resources (eg call centres) are shared with other services, costs should be split appropriately. For example, if half of all calls received relate to a specific service, then assign 50% of the call centre costs to that service.
Cost per digital transaction
- Work out the total cost of providing the digital service.
- Divide the total cost by the total number of transactions completed digitally, including assisted digital transactions.
Where processes and costs are common to more than one channel (eg processing wet signatures for passports, or printing driving licences), split costs appropriately. For example, if half of all transactions are completed digitally, then assign 50% of the common costs to the digital channel.
Costs to include
In the full cost of the transaction, include:
- accommodation, including capital charges for freehold properties
- fixtures and fittings
- office equipment, including IT systems
- postage, printing, telecommunications
- total employment costs of those providing the service, including training
- overheads, eg (shares of) payroll, audit, top management costs, legal services, etc
- raw materials and stocks
- research and development
- depreciation of start up and one-off capital items
- taxes (VAT, council tax, stamp duty, etc)
- capital charges (if they were not met separately when the service was established)
- speculative or actual insurance premiums
- fees to sub-contractors
- distribution costs, including transport
- bad debts
Exclude these costs from the transaction:
- enforcement costs
- replacement costs of items notionally insured
- start up costs (those which can be capitalised in the accounts)
How often cost per transaction should be measured
Measure cost per transaction on a quarterly basis. It should cover the last 12 months to eliminate seasonal fluctuations.
Measure cost per transaction for your existing service - if there is one - to create a baseline for comparing the future cost per transaction. When the digital service is exposed to real users (whether in alpha or beta) include it in the reported cost per transaction.