Phil Thompson, Head of BPIF Business, explains how you can get more from your management information system.Regardless of how well you use your MIS, there will be measures and processes that can be assessed and improved with relative ease and minimum cost, and in return help you with key management functions that will, if introduced appropriately, significantly improve your bottom line. While the following is by no means a comprehensive guide to managing a business via MIS, it does aim to identify where such systems can make a direct contribution to improved profitability.
Forecasting cashflow is a critical task, especially where large amounts of materials are purchased and/or where customers exercise their full 90 days to pay terms of business. Interrogating your MIS for information on all expected work related payments, corporation tax, capital expenditure etc., means a forecast can be prepared and seasonal pressures can be identified and prepared for.
The month end forecast is easily produced by taking the average added value/day up to the current point in the month (normally available directly from the MIS), and then multiplying by the number of working days in the month.
With falling job values, it is easy for sales and administration costs to become a large proportion of the end price, at which point a job is no longer profitable, but this would not be shown up by most costing systems. Therefore it is important to analyse the costs for core administrative functions such as processing an order, creating a job bag, raising an invoice, producing an estimate/quotation etc. This can be done using the standard costing system within an MIS.
Well-selected KPIs can be motivational and provide the measure against which improvement can be assessed. Importantly, the opposite is also true, with poor KPIs potentially creating conflict and de-motivation.
KPIs are part of process which involves:
- Establishing KPIs for all key operations?
- Establishing targets for all KPIs (for individuals/teams/departments etc. as appropriate)?
- Collecting and analysing the data necessary (largely done by the costing system, which can be supported by
- shop floor data collection)?
- Monitoring trends (usually best done by presenting KPIs
Effective and optimum use of an MIS depends on having competent managers who know what information and analysis the relevant MIS can handle, understand how it delivers the information required and then actually use that information.
To achieve this, training is required, not just when a new system is installed, but as an ongoing requirement. MIS suppliers provide training in the use of their systems but it is unlikely that users will be able to absorb it all in one go. Some of the suppliers and some of the print companies point out that telephone support has a valuable training role, especially where this is conducted by the technical support person at the MIS supplier remotely taking control of a workstation in the print company and demonstrating how something should be done. In this way, training related to the immediate problem is provided at a reduced cost.
An MIS needs someone within the user company to ‘own’ it. There are differing views on who this should be and there is no right answer. Commonly the MIS becomes adopted by the finance function in a company, but it could equally be production or sales. In order to ensure a balanced perspective it could be argued that it should be the responsibility of the managing director and while this should ultimately be the case, it may be too much to cope with. Another approach that can work is to have an MIS team in which all major functions are participants.
Implementing the above will enable management to have accurate and deep dive information in a timeframe that allows it to empower decision making, ensuring that opportunities can be identified and threats responded to.