When a business owner starts a company, typically, the business owner or HR manager will recruit employees, sell products and services to customers, and pay the costs of running the company. However, there are some burning questions to consider: Is the business actually making a profit or generating revenue? Will the company account have enough funds to clear expenses? Do they have enough raw materials in stock to meet the current or upcoming demand for their products?

The business owner may be unable to answer these questions because he lacks a reporting mechanism that informs him of the things that are going on in the business. And this is where an MIS comes in.

What is a Management Information System?

While bookkeepers are hired to prepare the records of shareholders, lenders, and taxes, this type of information is however not really useful for managerial purposes.

A management information system offers the data that business executives need to understand how exactly their business is performing. An MIS collects information from various areas of an organization, including taxes, debts, expenses, document flows, accounts payable, accounts receivable, cash balances, profits, inventory control, sales and marketing, and human resources.

( Also Read: What is Human Resource Information System? )

How Management Information Systems Can Help Companies Grow

The absence of an effective and functional management information system affects the productivity of business managers. It leaves employees working hard all through the week without any sense of purpose or direction. A good management information system offers the necessary data needed to identify areas that are non-performing in the organization.

The following are the benefits of a management information system:

  1. It enhances the productivity of employees

    When a management information system is in place, the employees in a company will become more productive as they won’t have to spend time gathering the information that management demands. A well-structured management information system will collect all the necessary data without any additional input from the workers. MIS has been credited for reducing costs, errors, and time associated with information processing.

    To enhance productivity, a management information system can also be an online transaction processing system or OTPS. OTPS involves the accumulation of data as input, analyzing that input data, and then updating the data in order to generate meaningful insight from the processed data. Another way by which MIS also enhances productivity is by enabling customers to use a custom integrated system (CIS) to process their individual transactions.

  2. It leads to better decision making in the company

    A management information system provides higher availability of data, thereby reducing uncertainty and allowing managers to make better ratio quality decisions based on insightful data. In addition, when Management Information System is used to analyze a situation, it provides all the necessary information about that situation and then expects you to make the decision. It also offers some form of recommendations that give insight into the decisions to take.

  3. Encourages smoother communications between departments in an organization

    When employees, heads of department, and managers are sharing the same information, there will be better communication across all levels in the organization; and as a result, they will be able to pinpoint problem areas and agree on mutually useful solutions. MIS manages information and drives communication between diverse departments and teams. A collaborative MIS is a specific system that facilitates better teamwork in an organization.

  4. Helps to achieve a higher level of efficiency

    With a functional management information system, managers can get the necessary data that will help them in identifying the strengths and weaknesses of an organization. This will consequently help to achieve a higher level of efficiency within the company.

  5. It serves as a means of exploring several scenarios for different alternatives and economic environments

    An effective management information system makes it possible for the management to explore multiple alternatives to determine the possible results before finalizing commitments and decisions.

  6. Boosts an organization’s competitive advantage

    A standard MIS will help managers to run a more efficient business, leading to the reduction and elimination of weaknesses and areas that are non-performing. At the end of the day, the company will experience an increase in its competitive advantage over other industry rivals.

  7. Provides more customer data

    A management information system will reveal additional information about the customers and with this useful information about the customer needs, the management is better positioned to improve customer service and deliver highly effective and promotional and marketing campaigns.

Final Thoughts

In all, a management information system(1) is important for any small enterprise manager who is committed to the growth of his organization by improving performance. With an effective management information system, business owners will be making smarter organizational decisions based on critical analysis of data, rather than on a trial-and-error basis.