The more you know about your business, the more likely you are to make good decisions. This is especially true when it comes to your finances, but it’s also important in boosting your employee morale and customer satisfaction.
Here’s why you should focus on management information, and how you can improve it.
What do we mean by management information?
Management information refers to any data that helps owners and managers to make decisions. When it comes to finances, this data usually takes the form of financial metrics to gauge a company’s performance. Common metrics include:
- Revenue
- Gross profit and gross profit margins
- Sales growth
- EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation).
There are also metrics which measure non-financial wellbeing. These are often called qualitative metrics, and they include employee retention, customer satisfaction and your company’s reputation.
By combining these with financial metrics, you can get a more rounded view of how your business is doing.
The importance of Key Performance Indicators
You can use your management information to create KPIs (Key Performance Indicators). KPIs are essential tools, by providing valuable metrics to gauge success and identify areas for improvement. They are targeted goals, usually related to a specific metric. Integrating KPIs into your MI ensures that these metrics are not standalone data points but rather integral to daily business operations.
An example KPI would be challenging your team to achieve a 5% increase in sales revenue by the end of the quarter. When used correctly, KPIs can be a great motivational tool.
Why is management information important?
Running a business is all about decision making. Management teams make choices that will affect the entire future of their company, and this is why it’s vital to have good information. Taking a data-driven approach to management has all kinds of benefits:
- You can spot problems at an earlier stage and rectify them before it’s too late.
- You can set realistic goals based on up-to-date information.
- You can see the effects of your decisions reflected in the data, allowing you to change course if things aren’t working.
- Gathering detailed information shows your employees that you are engaged with the day-to-day running of the business.
- You will gain a more accurate understanding of your employees and their roles, making you a better people-manager.
You can also use management information to create KPIs (Key Performance Indicators). These are targeted goals, usually related to a specific metric.
An example KPI would be challenging your team to achieve a 5% increase in sales revenue by the end of the quarter. When used correctly, KPIs can be a great motivational tool.
How can I improve management information?
Managers can potentially have access to a huge supply of information. The challenge is picking out the useful data from the background noise. There are a number of ways that you can make this easier:
- Invest in automated accounting software. This will make a huge difference to both the accuracy and the accessibility of your data. Most accounting software packages have a targeted search feature, letting you find the information you need in a matter of seconds.
- Make use of your accounting software’s reporting tool. Automated accounting software can generate detailed reports based on the metrics of your choice. This allows you to remain flexible, rather than waiting until the end of your normal accounting period to evaluate your progress.
- Talk to your team. This may seem obvious, but some of the most useful information can be gained simply by asking. Your staff may be better placed than you are to flag up problems and suggest possible solutions. You could schedule a regular team meeting where you open up the floor to employees, or create an online suggestion box for employees who wish to remain anonymous.
- Gather customer feedback. New technology has made it easier than ever to find out what your customers think of your service. Pay attention to online reviews and consider sending out a customer satisfaction survey. You can increase the number of responses by offering an incentive to those who participate. Also, try to update customers on the ways in which you are responding to their feedback. This will make them more likely to participate in future surveys.
Talk to us about management information
Knowing more about the operations of your business can help you make significant improvements to performance. For more tips on gathering and using management information, don’t hesitate to get in touch. We provide Monthly Management Accounts for many of our clients, and also work alongside other clients’ accountants to provide this as an added value service.
If you are considering finance outsourcing services for your business, talk to us. Choosing the ideal accounting outsourcing company for your SME needs thorough consideration. If you want to know what our clients think of us check out our Google reviews.
To discuss how we can support your business with our accounting outsourcing services please get in touch. We look forward to hearing from you.
Sources
- https://www.rightway.co.nz/blog/why-is-performance-measurement-important-to-the-success-of-your-business
- https://realbusiness.co.uk/the-importance-of-measurement-in-business
- https://visionedgemarketing.com/non-financial-metrics/
- https://www.investopedia.com/terms/k/kpi.asp
- https://sharpencx.com/blog/encourage-customer-satisfaction-surveys
Disclaimer: This resource is provided as a guide only and we recommend seeking professional accounting advice before making decisions. Use of this guide is for reference only. Specialist Accounting Solutions Ltd accepts no liability for any errors therein or any losses or damages arising from it.
