23 June 2022
Getting the best from management information
With so much data potentially available in your business, it is important as an owner to know what information you should look at regularly and how to analyse it.
It is far too easy to get overwhelmed with reports and lack focus on the things that really matter in your business.
Reviewing the right information regularly and taking corrective actions could make a huge difference to your organisation.
What is management information?
Management information is the data in your business that provides critical information to help business owners and directors with business decision making. This data can come from a variety of systems and in a variety of formats.
Management information covers a wide range of areas such as financial data like profit and loss statements, cashflow forecasts and budgets. But it can also cover a much wider range of areas like inventory, sales data and customer satisfaction scores.
What is a Management Information System (MIS)?
Management Information Systems bring data together in an easy to view dashboard or set of reports. Most systems will allow you to pick the important metrics for your business and present them in a way that is easy to read, easy to compare and easy to assess your business performance.
The benefit of an MIS system is the ability to set targets and performance standards and for the system to alert you to deviations allowing you to quickly take corrective action.
Why is management information important?
Management information can be important to make future decisions, implement new processes, improve efficiency, obtain funding and increase profits.
What management information should I use?
The management information you need as a business owner will vary dependent on your sector and how your business operates. However, here’s just some ideas of the type of information you may need.
Current financial information
Cashflow statement – Showing your current cash position and whether you have money to meet your operating costs and obligations. It looks at cash in and cash out of the business.
Profit and loss – showing how much your business has earned and spent in a specific period.
Balance sheet – shows you how much your business owns, how much it owes and how these assets and liabilities are distributed.
EBITDA (Earnings Before Interest, Taxes, Depreciation, & Amortisation) - Measures revenue after expenses are considered and interest, taxes, depreciation, and amortisation are excluded.
Cost Of goods sold - By tallying all production costs for the product your company is selling, you can get a better idea of both what your product markup should look like and your actual profit margin.
Customer lifetime value / Customer acquisition cost - The ratio of customer lifetime value to customer acquisition cost should ideally be greater than one, as a customer is not profitable if the cost to acquire is greater than the profit they will bring to a company.
Inventory management
Managing inventory can be vital to many businesses. Whether it’s tracking inventory turnover rate, stock to sales ratios, backorder rates or average days or weeks to sell. If you are in the business of selling goods, you will need accurate inventory management to thrive and survive.
Productivity information
Productivity information can be important dependent on what business you run. It can include things like projects completed, revenue per employee, turnover rate or overall labour effectiveness.
Just thinking your team are doing well because a job gets done, isn’t enough. If you track hours relative to output, then you will be far more informed about your production process and costs.
Sales data
Understanding what sells well in your business, who is buying it and where your strongest sales come from is important. Measuring sales enquiry conversion, meetings and calls per sales rep or tracking sales by product will help you to make decisions about not only your sales team but future products and services you offer.
Forecasting
Having forecasts and projections can help you make better decisions. Cash flow forecasting can be critical to highlight any potential cash flow crisis in the future. Cash flow forecasting is often also necessary to get future funding from lenders.
What is good management information?
Good management information needs to be:
Accurate – trusting this information to run your business and make sound decisions is crucial so it must be accurate.
Prompt – if it takes months to pull the data together it’ll be too out of date to be of use to you.
Relevant – decide in your own business what is relevant to you or your sector. Don’t pull data for data’s sake.
Acted upon – don’t collate data and then not use it to make effective change or future decisions. If you don’t intend to use it to make changes if needed, then you’ve wasted your time collating it.
Summary
Management information should give you the information you need to make decisions, improve performance, and keep control of all areas of your business.
Accurate and up to date management information that is analysed and acted upon can help your business become more competitive, more profitable and more successful.
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