Information relevant to a business can be obtained from both internal and external sources. Different types of information may be required for different purposes in an organization.
For Instance, a sales manager may require information on the sales performance of his/her team in order to evaluate growth in sales over a specific period of time or to calculate incentives to be paid to his/her team members.
To obtain relevant information, it is important to establish proper systems throughout the organization. These systems should be designed in such a way that all the relevant information is available as and when required.
It is important to note that any delay in flow of information can result in serious consequences such as loss of potential sales opportunities, possible dispute with a customer or vendor, problems in employee management and so on.
Meaning of Management Information System
As the name suggests, any system designed to generate and provide information for the management is known as management information system or MIS. MIS should be designed by taking into consideration the organizational structure and information requirements.
Any system which is not capable of generating desired information will serve no purpose to the organization and will only result in additional costs for the company.
For Instance, in the absence of a proper inventory tracking system, a company may not have sufficient information on the quantities of raw material, work in progress and finished goods. This can result in unnecessary procurement of costly raw material or overproduction of finished goods which can further result in blockage of funds.
Importance of Management Information System
MIS offers numerous advantages, some of which are listed below.
1. With the help of MIS, management remains informed on current trends and situations that are relevant and critical to the business operations.
2. Adequate information can help the management in facing challenges prevailing in the business environment more effectively and take timely decisions to overcome these challenges.
3. MIS can help the company to stay ahead of its competitors by taking advantage of various available business opportunities.
MIS can be implemented in any type of organization irrespective of the size and nature of business (though associated costs can be a limiting factor for small scale organizations).
4. MIS helps in saving management time, as it avoids the need to go through each and every aspect of business operations. Management can focus on core areas of business operations rather than wasting time on analyzing irrelevant information.
5. MIS can be used for generating information at every level of the organization. With proper MIS, information can be obtained for a process, department, division or a branch of a company.
Even though MIS may not be able to generate the desired results immediately, its importance in overall business management should not be ignored. MIS should be developed in such a way that it becomes an integral part of the organization’s business activities.