Historic Ratio Analysis verses MIS For MSME

 Yesterday, I met a 79-year-old entrepreneur, a former Deputy General Manager of Syndicate Bank, who has been running a testing unit for nearly 30 years without interest expenditure. He confidently explained that he uses MIS every day to monitor his business.

However, when I compared his Trading and Profit and Loss Accounts for two years, I observed a four-percentage-point decline in service gross margin. Since a testing unit has no conventional opening or closing stock, the focus was on revenue and direct testing costs such as reagents, consumables, direct labour and outsourced services.

This experience reminded me that daily MIS and periodic benchmarking serve different purposes. MIS shows what is happening today, while historic ratio/comparative analysis reveals what is changing over time.

For MSMEs with limited pricing power, quarterly benchmarking can become a practical self-diagnostic tool. By reviewing GST turnover, wages, electricity, direct costs and operational volumes, entrepreneurs can identify cost increases, margin erosion and underperforming products or services. They may then apply selective price corrections where competition is lower and customer value is stronger.

The entrepreneur does not always need an external consultant to begin this journey. A simple quarterly review can help the MSME move from data availability to data utilisation, cost consciousness and evidence-based decision-making.

The first benchmark can come from the enterprise’s own history:

“Compared with the previous period, what has changed—and what should we do about it?”

If major MSMEs in India(8cr) can start utilizing their internal ratio, they will move from guilt-feeling to decision making to data driven decision making and this can reveal under utilization of their existing assets.