INCREASING YOUR MARGIN
In a busy business it is very easy to forget the importance of understanding and controlling Operational costs and the corrosive impact these can have on your business margins.The first step in adopting a costs management strategy is to implement a robust Management Information System, providing the business with powerful reports that delivers accurate and meaningful information on key business performances, thus facilitating effective decision making. Without management reports many organisations adopt a simple but short term cost cutting strategy when faced with hard times or lean margins, the harsh reality of which may lead to poor sales growth as the efficiency of the business is impacted by the cost cutting measures taken.
There is a more customer friendly but often overlooked way to improve margins:
• Implement a Management Information System (MIS)
• Quantify all your operational costs
• Review where and how these costs are being incurred
• Identify alternative and more effective way of operating using MIS
Spreadsheet Solutions and Sancus can provide your business with both the critical MIS framework and the procurement analysis and delivery that will ensure your operational costs are contained and based on effective decision making.
What is a Management Information System?
A business cannot make effective changes, without first understanding how it operates and identifying areas requiring improvement. In this digital world it appears there is powerful data available for every aspect of a business operation, however the lack of time or relevant experience means the data may not be presented in a way that allows management to make easy and effective decisions. MIS in its simplest form will show the business what is happening within their business though the provision of varies reports. With this data it is then possible to identify areas that warrant further attention and analysis, which in turn could lead to improvement is business performances. As an example of this process, let’s look at a specific aspect of business costs relevant to every one – Energy.
Every business will consume energy in one form or another and the costs incurred will impact on margins. Many businesses do not have the time or inclination to review energy costs and assume their current supplier will ‘look after them’. Some businesses will take the steps to tender their energy use out to suppliers each year comparing each tender to identify the cheapest supplier. Very few businesses will look at ‘how’ they use energy and take steps to reduce consumption and therefore their costs. An MIS will provide the data that allows management to review how energy is used in the business and might then choose to take steps to improve consumption by implementing changes to the way it works.
Lets look at an example of how raw data, available within a business, can be used in an MIS framework to best effect: The following table is an extract of a businesses half hourly electricity use.
The data in its raw form, shows that it is difficult to interpret anything meaningful. The user of this data would find it impossible to extract key usage information to use in any analysis, and therefore identify changes that need to be made to reduce costs and increase margins.
By simply loading this raw data into an MIS framework it is possible to turn data into useful and effective management reports.
The Energy Usage Report spreadsheet below is a good example of this.
Here are 2 of the many charts and usage tables available within the report which. The graph on the left shows annual usage, and the one on the right shows daily usage (the other graphs show monthly, weekly, and custom usage).
The Annual Usage Chart clearly demonstrates key times of the year / month where energy use has spiked and therefore costs the most. The Daily Usage Chart is an example of where the report has allowed the user to tunnel down by month, and then by day, to identify exactly where the ‘spikes’ occur. It is then a matter for management to decide if a) changes can be made to the energy demand pattern to cheaper times of the day OR b) a new tariff is required to better reflect actual demand.
These are questions which would not be possible without the level of granularity a MIS report would provide.
Spreadsheet Solutions and Sancus can provide your business with both the MIS framework and the expertise to draw on the information supplied, to identify the right suppliers for the business needs, delivering stronger margins and enhanced profits for your business.
If you run a business with a turnover greater than £5m and recognise the benefits an MIS framework could deliver, we would love to talk with you. Please get in touch by using any of the links below: