In the world of tech, where constant change, rapid pace, and innovation prevail, staying ahead of the curve is essential for tech founders and finance leaders. To navigate this dynamic landscape successfully, it is crucial to have access to timely Management Information (MI) to empower you in making data-driven decisions.
Management Information can come in many levels and forms, from basic management accounts to enhanced management reporting packs with bespoke KPIs, scenario planning, budgets and forecasts. In this blog post, we will explore why tech companies’ need MI…
Why Smart Management Information (MI) Matters
Let’s take some inspiration from Simon Sinek and start with why. Why is timely and relevant MI crucial for your tech company’s success?
In the rapidly evolving tech industry, making strategic decisions based on accurate and timely information is paramount. MI enables you to assess the effectiveness of your pricing strategy, address customer churn, optimise customer acquisition costs, measure your cash runway and much more. Without it, decisions involving your financials are based on guesses and intuition, not facts. Real-time insights are vital for agility in responding to financial and non-financial trends, setting your company up for sustainable growth.
Identifying Opportunities and Managing Risks:
Management Information can also allow you to spot potential growth opportunities and proactively mitigate risks. From tracking your cash runway to mitigating the risk of running out of cash before you have time to commercialise your product or raise investment to identify opportunities with a new pricing strategy, MI can be an invaluable tool.
Planning For Various Outcomes:
Another ‘why’ is that it can help you plan for various outcomes through planning. Scenario planning allows you to produce cash flow forecasts for different scenarios, which may be external such as market conditions or even internal, such as the decision to delay the launch of a new product or increase marketing spend. Forecasting these different scenarios helps you identify the risks and opportunities associated with them.
Fostering Innovation and Product Development:
On the face of it, you wouldn’t expect that innovation and product development can be driven through management information. However, if you expand your management information beyond mere financials, you will also get plenty of data that helps you understand more about your customers, from feedback, usage, churn and upsell activity, it can all be useful in deciding where to allocate money for further innovation and development.
To achieve your business vision and objectives, it is crucial to ensure that your entire team is aligned and rowing in the same direction. However, it’s hard to have your team all singing from the same hymn sheet when there isn’t one single hymn sheet. Therefore, MI can provide clear goals and enable regular tracking of progress, fostering alignment and optimising outcomes.
Effective Investor Management:
One common theme (but not rule) with tech companies is that often they will raise investment. Another common theme (and you could argue, rule) with investors is that they’ll want to understand how their investment is performing. Therefore, if you do or are planning to take on investors, you should be aware that they’ll likely also want to see MI that showcases how your company is performing (be it good or bad).
Often for those raising investment, it isn’t just money you’re looking for but also expertise, so providing a board pack including MI to your investors will help foster engagement and get their constructive input and support.
In our next blog, we’ll cover the ‘what’ and ‘how’ of management reporting but you can discover more by downloading our Smart Accountants’ Tech Company’s Guide to Management Reporting here. Alternatively, please contact us directly to discuss how we can support you.