In the dynamic realm of startups, maintaining a clear vision and swiftly adapting to the ever-changing market dynamics are crucial. As these businesses scale, they encounter a trio of formidable challenges: maintaining control, gaining deeper insight, and ensuring predictability in operations. Peter F. Drucker, once said, “What gets measured gets managed.” In this Vimarsha we present some simple yet highly useful information about MIS (Management Information System). This information is essential for anyone looking to create an optimal MIS for their organization or assess an existing one.  

What is MIS? 

An MIS, at its core, provides financial metrics to track the performance of the company. Management uses it for data-driven decision making. It differs from financial reporting; because it provides far deeper insights and showcases relevant data to aid management during decision making.  

Using MIS, management can take appropriate strategic decisions such as employee hiring, increments, changes to budgets, timing and quantum of fund raise, pricing decisions, etc.  

Apart from decision making, MIS is used by a promoter or an investor to measure and understand the progress of the business and its operations month by month.  

For whom is MIS intended? 

The following stakeholders use MIS: 

  1. Leadership Team - Management should be able to track key business and operational metrics month on month to take agile decisions. MIS should give an accurate real-time reflection of the performance of the Company.  

  2. Investors: - MIS gives clarity in the direction in which the company is moving and offers them a bird's eye view of the company's performance. They can then evaluate their investment in the company. 

  3. Potential Investors - Latest MIS Reports offer a lot of insights to prospective Investors doing a diligence exercise prior to investing. 

  4. Business Partners - Generally, MIS is not privy to such third parties, but, with strategic partnerships, a complete or partial MIS Report can be made available to them, in consideration of certain ongoing contract discussions. 

What should an MIS include to be truly effective? 

While there is no single standard for creating an MIS, it depends on the sector, growth stage of the company, jurisdiction in which it operates and many other factors.  Following are some inclusions which can make your MIS more effective: 

  1. Appropriate Business & Operational Metrics - A centralized MIS dashboard displays all the key metrics to provide a snapshot of the company's financial health (current and projected). The system, after capturing all the data of the startup's operations, converts them to indicators like customer satisfaction metrics, operational data metrics among others. For instance, for a D2C business, the MIS could include a metric which measures the performance of its Internal Servicing Team, which would not otherwise be a part of the Company’s financial statements. 

  2. Variance Analysis - This focuses on a comparison between the budget and actuals. This offers a reality check for the company’s finances, highlighting where the business stands in relation to its projected financial course. For instance, A D2C startup could decide to either manufacture components in house or to buy them, after looking at their Factory Variance Metric.  

  3. Cash Flow Statement - Cash is the lifeblood of any business. Cash flows provide a forecast of the company's financial health, enabling startups to plan for future capital requirements. The company’s runway can be clearly calculated using this data. Hence, it is crucial for the company to meticulously track cash flow in its MIS. 

How valuable are the metrics measured in an MIS? 

An MIS can provide the management with the following value additions: 

  1. Strategic Control: The MIS inputs data from across the operations of the company, providing an overall view. This helps management to transition from impulsive decision making to a more responsive approach. For instance, a retail startup can use MIS to track both Sales inventory and customer satisfaction levels to evaluate the effectiveness of their sales strategy.    

  2. In-depth Insights: Companies can uncover the stories behind the numbers, enabling them to take necessary strategic pivots and operational optimisations. For instance, tracking the ‘click through rate’ for a web-based business instead of only tracking money spent on advertising offers a deeper look at the operations. 

  3. Predictability: Important financial indicators like revenue from active contracts, MRR, ARR, revenue from new subscribers or old subscribers cannot be ascertained from financial statements. Yet, MIS provides these critical information points to the management. Management can then proceed to strategise to bridge the gap between predictable revenue and targeted revenue rather than combing through historical data sets to derive meaning from them. 

  4. Investor Trust: A robust MIS is an indicator of a professionally managed company. This instils trust in the founders' capability to achieve targets, thereby having a positive impact on valuations. 

In conclusion 

For startup founders, an MIS isn't merely a day-to-day management tool; it's a strategic asset. It can significantly influence the company's growth plans and its scaling efforts. Strategic decisions can be taken timely. All these factors ultimately enhance value for shareholders.  

Success isn't guaranteed by simply implementing an MIS; it demands efforts to build and customise for the business needs. MIS also requires competent personnel to manage it continuously.  

 

We would be happy to discuss privately the optimal use cases surrounding this topic, and experiences or perspectives that differ from those shared in this Vimarsha. 
 
Special thanks to Divyanshu Chaudhari for their valuable insights in creating this Vimarsha, and to Sanjana Sudarshan for their meticulous editing contributions.