The Internal Management Reports are financial reports never been discussed in the school officially. Is it a surprise? I hope it isn’t. Okay, so what do accounting students learn in the school about financial reports? Journal entry general ledger, trial balance, balance sheet, income statements, share holder’s equity and cash flow statements, am I right? In the real accounting world, I meant in the work place, there are some of those business people would prefer to see customized report which is expected to deliver the only area they concern about, the only numbers they need to see—to be precise. That is what called “Internal Management Reports”.


Some of these reports are the financial statements, some are not. The good news is that there are no certain rules for these reports. You can use any format that results in the greatest comprehension of accounting information—needed by the management.

So I can say here that the types and formats of reports available to the accountant are limited only by the management imagination. Having said that, it also means that an internal management report of a company most likely would not be the same with other company. So I would rather recommend you to not only custom-design reports that meet a company’s specific informational requirements, but also to continuously modify them as circumstances change over time.

1. Cash Reports (For Internal Management)

Cash report? Don’t we have a cash flow statement? You asked. Yes, but the management can’t wait until the end of the month. One possibility of why they need an alternate cash reports is to determine the accuracy level of the forecast on a weekly basis, in order to see if the assumptions or data used in the forecast must be changed to make it more accurate or not.

You can create a report lists the actual cash balance at the end of each week for the last few months, showing alongside each item the cash forecast that had been made one month prior to each actual cash balance. For an example, you can make a five column list as follows:

  • First Column: Date/Week
  • Second Column: Actual Cash Balance
  • Third Column: Forecast 1 Month Ago
  • Forth Column: Variance
  • Fifth Column: Percentage Variance
  • Sixth Column: Notes (for large variances)

The dollar and percentage amount of each variance are then listed, as well as an explanation of any especially large variances. This can be a most instructive exercise, as the accountant will initially find significant variances between forecasted and actual cash balances; continual examination of the underlying problems that caused the variances is needed in order to eventually arrive at a more accurate cash forecasting system.

The most likely source of large changes in cash requirements tends to come from working capital, simply because of the large investment that is typically required in this area. To see how the main categories of working capital will vary over time, one can set up a combination of numerical and graphical information, that not only shows monthly totals for accounts receivable, accounts payable, and inventory, but also the trend line for working capital levels. This is a most useful tool for determining the existence of any problems related to a company’s investment in working capital.



2. Status Reports (For Internal Management)

Before you ward any question. First of all, let me say that the financial statements are the primary reporting product of the accountant. Do you agree with that? Okay, great. But, again, they are only issued (at most) once a month, which is too long for many managers to go without information about ongoing company performance. So the management needs a status report on daily basis.

It depends on the company policy. If your company allows any managers to see the financial report, then you can generate a daily financial statement for general perusal. Say this is for general perusal. This report contains all of the basic financial statement line items. The main difference is that it contains several extra columns that a reader can use to determine the status of the company in reaching its goals. Those extra columns could be:

  • Second Column: This Month’s Forecast
  • Third Column: This Months Budget
  • Forth Column: Variance From Budget
  • Fifth Column: Year-to-Date for Prior Months
  • Sixth Column: Average for Prior Months


For example, the two columns (Year-to-Date for Prior Months and Average for Prior Months) itemize the actual year-to-date results through the preceding month, which are then divided by the total number of months in the year thus far to arrive at the average value per month for each line item. This is a useful comparison to the budgeted amount for the current month, which is located in the third column.

Yet another source of information is the forecasted result for the month (in the second column), which is the accountant’s up-to-the-minute estimate of expected results for the current month. Finally, the first column contains the most recent actual results for the current month, which contains the least complete information until the month is nearly finished. By using four different estimates of financial results for the current month, the reader can draw his or her own conclusions regarding its most likely outcome.

The next fact is, much of the financial information contained within a financial statement is of no use to the typical manager, who is more concerned with operational data—an alternative to the financial statement, both in terms of the frequency of reporting and information presented.

To answer the call, you can generate a customized report for each reader in monthly basis. For this report, basically you would need to divide key measurements into two groups of areas: Financial and Operational.

The first area us consisted of 3 Financial Key Measurements, which are:

  • Cash (consisted of: Available Debt, Overdue A/R, and Overdue A/P)
  • Working capital (consisted of: Days Accounts Receivable and Days Total Inventory)
  • Financial (consisted of: Breakeven 2 month rolling)

and the second area is consisted of 3 Operational Key Measurements, which are:

  • Sales (consisted of: Backlogs for next month, month after next, two months after and the total of the backlog)
  • Production (Consisted of: Machine Utilization, % Order Line Items Shipped on time, % actual Labor Hours over Standard, and the Scrap in Dollars)
  • Warehouse (Consisted of: Total Inventory in Dollars, broken down into: FG, WIP and RM, all are in Dollars)


Each items then reported in the: Current month divided by week, and several following months.

The financial executives (Controller/Treasurer/CFO) or your boss is most concerned with the first area, which describe five separate components of company cash flow and the financial performance information. The three remaining operational measurements are specifically tailored to the needs of the managers of the sales, production, and warehouse departments.



3. Payroll Reports (For Internal Management)

The largest expense item in many organizations is payroll, which exceeds even the cost of materials. Proper control of this cost requires a detailed report that lists the salary or wage cost of each employee in comparison to the original budget.

For payroll report, basically you can group employees by department, with budgeted salary and wage level for each person. Next, you can show actual pay on an annualized basis for each successive month of the year. For an example, you can make the following columns:

  • First Column: Name of Employee
  • Second Column: Department
  • Third Column: Budgeted Amount
  • Forth Column: January (Actual Amount)
  • Fifth Column: February (Actual Amount)
  • And so on…

By doing so, it gives an extremely detailed view of exactly where a company is investing its payroll dollars.

If there are too many employees to make the report easily readable, they can also be summarized by job title within departments, or simply by department, though some of the effectiveness of the report will be lost with the higher degree of summarization.

As a supplement report you can also generate an ‘Overtime by Employee” report, separately. In the first column, you can put department as a header title and then broken down to name who are under the department. On the second, third, and so forth column, you can put the date of when the overtime is happened. On the next column of each employee, you can itemize either the amount or the percentage of overtime paid by person within each department. This is most useful if issued to department managers immediately following each payroll, so that they can see who consistently works excessive amounts of overtime.



4. Sales And Expense Reports (For Internal Management)

When actual sales differ from expectations, the accountant needs a report format that reveals exactly where the variance arose. A good way to show this is by presenting a report that is able to show customer by customer and the cause of the variance.  This report shows both the monthly and year-to-date variance by customer. For instant, you can generate a seven column report as follows

  • First Column: Name of The Customers
  • Second Column: YTD Forecast
  • Third Column: YTD Actual
  • Forth Column: Variance
  • Fifth Column: Month Forecast
  • Sixth Column: Month Actual
  • Seventh Column: Variance

However, many organizations do not budget their sales by specific customer, unless there are ongoing orders from each one that are easy to predict. If so, this format can be reduced to a smaller number of line items that reveal variances only for specific market segments or groups of customers.

A similar type of format can be used for expense control. A report that contains an expense control report that is sorted by responsible party within each department. For instant, you can make the following columns:

  • First Column: Department
  • Second Column: Responsible Person
  • Third Column:  January Expense
  • Forth Column: January Budget
  • Fifth Column: January Variance
  • Sixth Column: YTD Budget
  • Seventh Column: YTD Budget
  • Eighth Column: YTD Variance
  • Ninth Column: Full Year Budget

By using this approach, the report can be distributed to department managers, who can then issue it to the individuals within their departments who are responsible for specific expense line items. Of particular interest in this report is the last column, which notes the full-year budget for each expense line item. This number is placed next to the year-to date actual expense and variance numbers, so that managers can see exactly how much allocated funding is still available to them for the rest of the year.



5. Margin Reports (For Internal Management)

The status reports (Internal Management Report No. 2) which have been discussed provide a high level of information to the reader. For a more detailed examination of operating results, it is useful to generate several types of margin reports.

A report reveals the gross margin of a series of company products, using their standard costs, is also a good way to go. For instant, you can generate a report consisted of columns with headings: Item No; Item Descriptions; Quantity Sold; Unit Price; Total Revenue; Unit Cost Material; Unit Cost Labor; Total Cost Material; Total Cost Labor; Margin (%); and Total Margin in Dollar.

This reporting format reveals the gross margin for the sales volumes generated for the year-to-date or month for the listed products. The use of standard costs will reveal accurate margin information, as long as the standard costs are routinely compared to actual costs and adjusted to yield a close approximation to them.

By using standards, many computer systems can automatically access all of the listed information and create the report with no human intervention. Margins can also be presented by customer. Many accounting systems that are integrated with the production system can automatically provide this information, too.



6. Capacity Reports (For Internal Management)

The extent to which a company is utilizing its assets tends to be one of the least reported by the accountant, even though it represents one of a company’s core drivers of overall profitability.

There may not be any systems in place that track the time during which a machine is being used, but some simplified measure can usually be derived, even if one must back into the number by calculating backward from production volumes the amount of machine time that must have been used to conduct the required manufacturing operations.

The result can be plotted graphically, a graphic that shows the percentage of utilization for a series of the major manufacturing processes. The calculation of capacity should include a notation regarding the number of hours per day that are used for the measurement—otherwise, management may feel compelled to purchase more equipment if the calculation is based on an eight-hour shift, rather than a 24-hour day. The capacity planning report can also be used in the service industry, with the chargeable hours of individual employees or departments being substituted for machines.