During our team meet a few days back, A bomb was dropped on us!
Finally we were funded and were about to have a bunch of venture capitalists reviewing our work top to bottom and grinding around our financials.
And being in the accounts departments thing were getting difficult for us for tracking those financials every month. Struggling day in and out the whole team was wondering for a best and the simplest way of showing our financials every month.
So as usual we thought of the same old school method of making business performance snapshots.
But, that’s when a newbie told us about MIS Statements and how it was supposed to make things easier.
And today I’m going to pass on these learnings to you.
MIS Statements – With increasing complexity in businesses and technological advances, evaluating organizational performance has become crucial.
As Managements we rely on extensive reporting of every aspect of our business to help with efficient management. Such reports provide deep insights for making smart business decisions and strategies.
Management Information System, which is integrated with accounting software, is the full form of a MIS report. It offers a wide range of reports on trends, inventories, cash flows, and other topics to encourage the use of automation in management information systems, allowing businesses to run more efficiently and productively.
MIS Statements can be prepared monthly, quarterly, semi-annually or annually as per the investors or board of director’s requirements.
What are MIS Statements?
MIS Statements is a snapshot of the revenue, expenses, cash flow, balance sheet etc. It gives a detailed bifurcation of areas where expenses are incurred and where revenue was generated. It is a systematic individual analysis of the aspects. For e.g. for a startup which sells goods A & B an MIS statements defines the revenue generated & expenses incurred from A & B individually which can help the managers take corrective measures. If B is a loss making product the managers can decide to shut it completely or partially depending on the demand for that product.
MIS Statements also includes various charts, graphs with analytical representation which gives an appealing overview of the company’s performance.
Sounds fascinating right? The whole companies performance overview in some mere slides.
How do we make MIS?
So Mainly MIS Statements are made of 4 important components:
- CFO Dashboard
- Industry Ratios
- Budget Variances
- Company Financials Statements
Looks easy right?
But first – Let’s take an understanding of these 4 components in detail:
Starting with the CFO Dashboard,
A CFO Dashboard is basically a glimpse of current month’s performance in comparison to previous months.
Revenue & EBIDTA are the main constraints which are similar in every business. Hence, they remain fixed.
Components in the CFO Dashboard varies according to the industry.
For e.g. In an healthcare industry occupancy of Beds, number of patients etc. are tracked whereas in an hospitality business the revenue incurred from the various franchises, the number of orders from dine in or takeaway are measured.
The dashboard shows the significant increase/decrease of these components between the current month and the previous month.
Secondly, Industry ratios helps us tell a story of our performance which mere numbers can’t. Key metrics help us compare our growth or downfall with the industrial performance. It gives precise percentages for better understanding.
For e.g. EBITDA Ratios, Marginal Ratios, Revenue Growth, Increase/Decrease in Costs, Cost as a % of revenue etc.
Some ratios are also industry specific for e.g. in the healthcare industry average revenue per patient, average cost per patient, marginal cost per bed etc. are measured.
Stay with me.
Budget Variances, simply put measures the difference between your budgeted performance with your actual performance.
Budget variances helps you realize the actual performance or growth of your company in comparison to your budgeted figures and helps you to take effective measures as required.
Lastly, Company Financials, it includes the Balance Sheet, Income & Expense sheet and Cash Flow statement.
Sheesh. Such a long one.
But an MIS seem easy right? Well, making them is easier. All you have to do is keep these key points in check while making them.
- Make sure the numbers are directly derived by the immediate manager.
- Formulas should be correctly put.
- Should be simple but informative
- Show comparisons in every month.
- Consistency (e.g. if amounts are in Cr or Lacs it should be the same overall)
- It should show a story or a chain.
So that’s it for today.
But, before ending I’ll let you in on an amazing fact.
- Our Budgets are compared with our MIS Statements to identify the variances. Which means MIS Statements are the base which helps the company to evaluate and predict their future budgets and work upon them.
Interesting isn’t it?
‘til next time,
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