In a previous blog post, we shared the fundamentals of MIS, including the relevant matrix that startup entrepreneur should typically examine. Let’s now take a closer look at a typical use case of MIS and its essentiality for the business growth.
How the MIS works?
At Auxano, MIS typically mean –
· P&L Statement,
· Balance Sheet and
· Cash Flow Statement i.e. company’s financial results for any given time-period
It can also include — non-financial data such as Customer conversion rate, retention rate and activation rate etc. as part of business KPIs.
Most of the entrepreneur monitor their P&L statements to determine the business growth. In addition to maintaining a P&L statement, it is important to understand how the profit and loss affects the Cash Flow statement and Balance Sheet.
By reviewing, the Cash Flow statement, the stakeholders (entrepreneurs and investors) may understand how the funds are being used and what is contributing or what activity is losing. It also gives the runway and cash in hand for running the business.
The MIS gathers data from numerous departments within an organization, including taxation, debt repayment, expenditures, accounts payables, accounts receivables, cash balances, earnings, inventory management, sales and marketing, and human resources.
MIS acts as a sort of catalyst, allowing management to obtain information about the business, its clients, and its employees in order to carry out its responsibilities effectively and efficiently
How MIS can help in Business Growth?
To better understand how MIS might help an entrepreneur to get the correct information at the right time for making decisions about the expansion of the business, let’s look at a few examples.
Trend Analysis — For instance, despite an increase in sales volume over the past three months, overall revenue may have decreased due to a decrease in average selling price. The idea is to deep dive into the variables influencing the growth or decline in revenue and aid to entrepreneur for future projections.
Revenue recognition — The revenue in the SaaS industry is derived from subscriptions. The revenue should be recognized over the subscription period from the date when services get started applying the accrual method from accounting standpoints. This way the correlation between paid user and revenue recognized can be well analyzed for cohort analysis.
Important statistics — Certain key matrix provide insight into the business’s growth trajectory
· Number of active users in certain period of time,
· Monthly recurring revenue (MRR) generated from the paid users,
· Contribution margin achieved,
· How much spent on marketing to acquire a new customer (CAC)
· Net burn, is purely the money in minus money out.
· The number of employees, market share, and turnover, it is feasible to gauge growth.
In this manner, an entrepreneur utilizes MIS to obtain the appropriate data at the appropriate moment for business growth.
Take Away…
Entrepreneur who is committed to the growth of his company through improved performance needs a management information system. The system can be developed gradually. A robust MIS enables the stakeholders to get to know the business in close to real time on a periodic basis. In addition, this gives confidence to the investors as ‘Governance’ are in place.
Author:
Rakesh Rana
