Understanding Management Information System

A Management Information System (MIS) is a framework that creates periodical reports of the financial status of the startups
sanjeev
11-May-2018
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Understanding Management Information System

MIS is a way to track progress.

A Management Information System (MIS) is a framework that creates periodical reports of the financial status of the organization. This causes the administration to guarantee proficient and compelling basic leadership. Reports produced by a MIS help to contrast spending plans and actual all together with change spending in specific areas. As a Founder, amid the underlying stage, you might be included with the prime exercises of your new business.

Particularly in these early hours, you should contemplate setting up such frameworks keeping in mind the end goal to not dismiss your vision. Summarised reports created by the data framework will come convenient for you to get a diagram of the business, and therefore, help settle on some key choices in light of the data.

MIS is the utilization of data innovation, individuals, and business procedures to record, store and process information to deliver data that decision makers can use to settle on everyday choices.

The following are the advantages of MIS data frameworks 

Quick Data Processing and data recovery – this is one of the greatest points of interest of an electronic data framework. It forms information and recovers data at a speedier rate. This prompts enhanced customer/client benefit 

Enhanced information Accuracy – simple to execute information approval and confirmation checks in a mechanised framework contrasted with a manual framework. 

Enhanced security – notwithstanding confining access to the database server, the electronic data framework can actualize other security controls, for example, client's confirmation, biometric validation frameworks, get to rights control, and so forth. 

Reduction of Data Duplication – database frameworks are composed such that limited duplication of information. This implies refreshing information in one division consequently makes it accessible to alternate offices 

Enhanced reinforcement frameworks – with cutting edge innovation, reinforcements can be put away in the cloud which makes it simple to recoup the information if something happened to the equipment and programming used to store the information 

Simple access to data – most business officials need to movement and still have the capacity to settle on a choice in light of the data. The web and Mobile innovations make getting to information from anyplace conceivable.

Let’s understand MIS through example of Restaurants Marketing Spends

Analyze the Marketing Spending where you divide the marketing expenditure into 3 ways-

1-Facebook

2-Pamphlets

3-Advertisementon Zomato

So, at the end of the month you would understand the conversionsfrom each of these 3 verticals

Let’s say you have spent 20,000 on these platforms and you earned

Facebook-40,000

Pamphlets-30,000

Advertisement on Zomato-50,000

It simply indicates Zomato is the most efficient platform formarketing. Here MIS comes into picture which helps in predicting the result innear future based on what we have done in the past. It not only givesstakeholders better understanding of performance but also gives externalstakeholders good understanding of progress you planned compared to previousone. MIS should be a periodical exercise.

KeyComponents of MIS system are-

1-BudgetVs Actual- Under this analyze thefollowing-

                                     What wasyour revenue Target?

                                     What didyou achieve?

                                     What wouldit cost for that revenue target?

                                     What would be the final actual directcosts?

                                      What arethe planned overheads?

                                      What wasyour net income or loss?

2-Unit Metrics- Unit Metrics helps you in understanding the importance of key components. Unit metrics encourages you to comprehend the significance of every segment of your cost structure and makes a difference you center around essential areas which are driving the cost effectiveness and enhance the zones which are prompting deviations from what you planned under this, analyze the following

                             What is the cost of production?

                             What would be the cost of distribution?

                             What were the Marketing Costs?

                             What were your incomes for every product?

3-KPI

Key Performance Indicators

KPI’s demonstrates a measurable value that demonstrates how fastlycompany/startups are achieving business objectives. Startups use KPI’s inevaluating their success at reaching time.

Keeping a start-up running productively is as troublesome asbeginning one from the beginning. For this, the entrepreneurs’ needs to keephim informed about the execution of his/her venture consistently. A business'continuous execution can be estimated and followed in light of pre-recognizedkey execution pointers.

Key Performance Indicators (KPIs) are quantifiable and traceable esteems that demonstrate the execution of the association as for the laid targets.

Parameters of KPI’s

1-Retention

2-Frequency of next purchase is important

3-Gross Margin/Contribution Margin in transaction

Let’s analyze some of the important financial KPI’s

1-Booking Vs Revenue

This is applicable in case of subscription laid model. Let’s take an example of Gym

For instance A subscribed annual gym membership costing 12000 ondate 1st date of Jan

As financial year closes on 31st march, your bookingswould be of 12000 that would be more of internal tracking basis which you willjudge the sales teams’ performance.

Actual Revenue (It is proportionate to the time period that ispassed)-3000

Tracking Revenue helps startups in evaluating actual health of company as on date

Tracking Booking helps startups understand potential future earning

2-GMV Vs Revenue

This KPI is applicable in case of Online Market Place

For instance,you have sold X Brand of Shoes of MRP=2000

Commissionfrom seller=10% of MRP=200

Hence, GMV=2000                 Revenue=200

Tracking GMV helps organization/Startups in understanding share inmarket they are operating.

Tracking Revenue helps startups in understanding the performanceof track of company

GMV-Standsfor Gross Merchandised Value. GMV iscomparative term that allows online platform to compare market place withinventory based model.

GMV is defined as sum total of grossvalue of merchandized value that is sold on platform.

Revenue is defined as take rate i.e.Percentage of GMV

By take rate - it is the commission that the platform charges fromthe merchants. So, revenue is really the money that the platform makes and GMVis the sum total of the entire value of the products that are been sold on theplatform

Tracking GMV helps companies, understand their share in the marketthey operate in, while tracking ‘Revenue’, of course helps understand and trackthe performance of the company.

3-Revenue Run Rate

Most widely used by DigitalBusinesses

RunRate=Last Months Revenue *12

RevenueLast Month=1 Lakh

RevenueRun Rate=12 Lakh

TrackingRevenue Run Rate helps companies progressively keeps track ofrevenue performance and takes corrective measures in time.

4-Gross Profit

Profit you have earned after deducting all your direct costs fromrevenue you earned

GrossProfit= Revenue-Direct Costs

Keeping Track of Gross Profit helps entrepreneurs in analyzinghealth of business

It indicates Growth and Profitability

5-Life Time Value

For instance customer spends 1000rs in which company earning 300rsper transaction

Customer is likely to come for 3 times

Life Time Value=900

6-CustomerAcquisition Cost

It is the amount of rupees you spend to earn Life time value

In short- Life Time Value > Customer Acquisition Cost

IF it’s not the case either reduce CAC or increase Life Time Value

7-AverageRevenue per User

Total Revenue Divided by Total Number of Customer. Average Revenue gives you the fair kind of review what kind of revenue you are earning from customer.

Average revenue per user now this is another KPI which is close towhat we looked at from an LTV but it's very different. Average revenue per useris effectively your total revenue divided by the total number of customers. Youhad all that period whereas the LTV was for your lifetime revenue per user ofthat particular user so both are very different. Average revenue per user givesyou a fair indication of what kind of the revenue you are earning from acustomer and what is the mix of your customer base.

ForInstance- IT firm

Revenue-1Crore

Numberof Customer=5

Average Revenue per User=20 Lakh Rupees

Gives you good understanding of how you want to grow your business and number of customer startups needto acquire to achieve your target

8-Conversion Rates

It Measures the Efficiency of startups

Let stake example of E-Commerce

Number of Visitors=1Lakh

Customer who buy=2000

Conversion Rate=2%

It helps you to measure growth of your business. Conversion Rategives an idea to investor how much money one should invest in your business.

9-Cohert Analysis

Measures Repeat Behavior.

Customer Acquisition=1000

Customer Repeating=600

Customer after 3 months=360

Customer Showing Repeat Behaviors=60%

Higher the rate or higher the rehash for any business is finesince it demonstrates that you have to spend considerably lesser and you woulddevelop naturally later on substantially more with what you've justcontributed. Presently the KPI's which you are taking a gander at as a businessvisionary likewise will be essential with the scale or the phase of businessyou are at and it's critical to recognize your KPI's from a long haul viewpointto such an extent that you don't take a gander at various KPI's as you come forexample when you are at the underlying phases of your business when youbuilding up your item in the market you need to comprehend whether your task isa decent market fit it or it's tackling an issue you have to center around theKPI's from a perspective that these are giving you a sign of whether your itemis fathoming the requirement for the market or for the clients by what meanswill you do that for example if your change rate is high, and an everincreasing number of individuals who visit your site do wind up purchasing youritem.

High repeat ratios at this stage also give the re-affirmation of the product market fit. Subscription businesses have very high cohorts since once these customers stick around for a longer period of time.