2 minute read
Haines Watts
By Daniel Morgan, Managing Partner, Haines Watts Esher
MANAGEMENT INFORMATION What is it and why do you need it?
Having a clear picture of the fi nancial health of your business is important for any owner. Management information is an umbrella term for data that relates to your business activity, but ultimately it covers anything that can help you to make informed decisions.
In short, good management information is the data you need to run your business, allowing you to monitor its performance and identify any bumps in the road ahead.
WHAT SHOULD YOUR MANAGEMENT INFORMATION INCLUDE?
A lot of management information that I see is backwards looking; for example, profi t and loss statements and balance sheets. It is still rare for businesses to include forecasting but this is where the value is.
Your management information presents a snapshot of your business’s financial health at one point in time. Forecasting goes one step further, offering predictions about how your business will cope in the future which can be vital in times of economic hardship.
The data can then allow you to monitor areas such as cashfl ow, so you can see if you are likely to run out of cash and key areas of the business that may struggle. This allows you to deal with issues before they become problems. WHAT MAKES GOOD MANAGEMENT INFORMATION?
There are three key characteristics of good management information:
1Reliable – you need to be sure that the information is accurate and gives a true reflection of the business’s performance through robust data capture.
2Relevant – your data should focus on the parts that matter, demonstrating whether your business is meeting it’s KPIs in a clear and easily understandable way.
3Easily accessible – if your data is too slow to gather it can quickly become outdated. You may need to review your systems and processes if this is the case in your business. HOW IS MANAGEMENT INFORMATION CREATED?
The best place to begin is to speak with your accountant and begin to review your processes. For some owners implementing management information is a big job, as they don’t have the procedures already imbedded.
The overall aim is to make the information easily accessible to allow for relevant information in a timely manner. Cloud accounting software like Xero can help with this. These programmes can also add a level of sophistication to funding applications as the way the data is extracted will look professional and sophisticated even if the numbers themselves are basic.
If you want to improve your management information to safeguard the future of your business, get in touch.
