Management information and why it’s important (October 2017)
Many businesses fail to gain the momentum of securing working capital and making profits. Of course, there are many factors involved with what makes a business successful or not but understanding the organisation and its numbers, and planning for the future could be the key to overcoming the obstacles ahead.
Management information (MI) is there to provide a helping hand. I’m a firm believer you should always listen to and evaluate advice which you seek. The provision of MI is the same. Listening to and understanding what the numbers, trends and forecasts are advising can provide the guidance needed to avoid failure.
From the MI the management team will have the tools to monitor the performance of the business. It will show what is working well, where money is being made, what unnecessary costs are being incurred and so on. With careful analysis of MI, knowledge and facts can be depicted which can be used to lead the business into one of success.
For example, a cash flow forecast might show that in 6 months there will be a cash shortfall. Here MI comes in two-fold. 1) We have this knowledge ahead of time and can therefore prepare for the shortfall, this brings us to 2), presenting the detailed MI to the bank can help their understanding of the position and, if necessary, secure funds to bridge the gap.
This example alone shows how vital having the information at your fingertips is, disaster might be unavoidable if the fact that you can’t make the wages month 6 isn’t realised until month 5. The MI will also communicate how to avoid the situation and/or carry on trade after the hurdle has been successfully passed.
Planning and decision making is constant and should all be based on reliable, accurate information. Implementing plans and concluding decisions founded on in house statistics and facts or knowledge reaped from intensive research, all part of the MI, will put any business owners mind at ease.
The systems implemented are the mechanism which allows for the provision of this accurate information and helps the business to flourish. Inadequate systems which do not work efficiently and supply workable material will result in poor management and affect the concern as a whole. System improvements can be derived from MI. It will give insight to what needs to change to ensure efficiencies are high and resources are being directed in the most effective way.
Many influences have many effects on a business. Understanding the needs of your stakeholders, where you are in the market, who your main competitors are and their position will offer a competitive advantage. MI is presented in many different forms and will be tailored to each individual organisation meeting their own specific needs.
In order for MI to be useful it should itself be an integrated part of the system and its importance understood by all, this will then ensure that the entwined systems are producing accurate results. Businesses and business transactions can change rapidly and in-order for there to be meaningful information around the organisation, regular input, updating and analysis is essential. Therefore, MI is fundamental in understanding the current and future financial position of the business.
Having MI at hand has no purpose if it is not going to be utilised for its intended objective, to address future problems and be a proactive instrument. Therefore, working with MI specialists is key to giving a business competitive advantage.
Written by Katie Moore ACCA, Finance Manager at Elite MI Limited. For further discussion around how MI can be utilised efficiently in your organisation Katie can be contacted directly by e-mail – firstname.lastname@example.org or on her mobile 07765 185808.