Information is Power

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In any business information is key, but now more than ever, the need to use management information systems to make sure you spot any early warning signs is essential.

These uncertain times mean it’s vital to arm yourself with as much information about your business as possible. When turnover is going well, margins are going up, profits abound and cash isn’t an issue, there’s a tendency to get complacent.

In the current economic environment you need to use the internal information to make decisions and work out savings. A management information system makes that easy.

Key Performance Indicators
Even the basic systems produce data that will form the basis of your management information. The information provided by the system should be used as a key performance indicator and a way to highlight any areas of concern. Monthly figures should be measured against the financial plan to show where discrepancies against the anticipated figures have occurred. By discovering discrepancies, you can take corrective action.

Even the smallest businesses should have a financial plan in place that gives an idea of what their monthly figures – relating in particular to turnover and margin – should look like. Every month, you should then be managing those figures and looking at exactly where you are against them.

You need to ensure the data is accurate and know how to interpret it. Lots of businesses don’t have accurate data and that’s where we can help. It’s very easy to look at the information you have and think the business is healthy but you might have missed a large supplier invoice that you’ve not accrued for. Our professional support can ensure the accounts are accurate rather than just showing half the picture.

Cash is King
We all know that cash is king in a recession, and that as businesses are struggling, they can take longer to pay invoices. A management information system can produce an Age Profile of your debt that will show you how old your debt is and you need to be on top of any which is over-term.

Bank Requirements
Finally, your management information system is essential for producing data that your bank needs. As liquidity tightens, you need to make sure you’re meeting all the terms your bank demands – one of which may be to produce management accounts every month.

Most businesses work to some kind of overdraft or funding from a bank and you need to understand what your facilities are and what you need to do in order to stay within covenants. If your bank says ‘You were meant to give me management accounts every month,’ but you’ve not been doing that, you’ve broken the terms of the facility. This could lead to them renegotiating the terms, particularly in businesses where they perceive risk.

However, if you supply them with management information that reassures them and helps them understand your business, and if it’s done by someone like us, they’re even more comfortable as they know all the information they need is there.

Essentially, your management information system generates vital operational and strategic information and, if used correctly, can avoid your business getting into any difficulties.

For further information on getting the most out of your management information, contact your local Haines Watts office.