Reporting

Internal vs. External Reporting: What Are the Differences?

Reporting is essential for optimizing your business strategy. But when it comes to internal vs. external reporting, what’s the difference? We asked 35+ professionals to share their insights.

Stefana Zaric Stefana Zaric on September 7, 2021 (last modified on September 19, 2021) • 15 minute read

How should I organize my report?

How in-depth should it be?

What information should I highlight?

If there were thought bubbles above your head right now, these questions would likely be inside. They’re only a few of the many doubts that cross your head when you’re about to create a report, whether it’s a marketing report, a financial report, or an operational one.

Understanding the purpose of internal vs. external reporting will help you organize your data efficiently and create clear and on-point reports with helpful data that can improve your future activities, decisions, and strategy adjustments.

In the following sections, we’ll share exactly what internal and external reports are and how to make a difference between creating each type.

What Is Internal Reporting?

Internal reporting refers to data collection for internal use. Simply put, you don’t collect and analyze data to present it to a client or anyone outside of your business, but to use it within your team for different purposes, depending on report type: improving your marketing strategy, redefining your KPIs, optimizing your expenses, etc.

Internal reporting is useful both for small businesses and large companies, and they don’t always follow the same structure.

Different companies use different reporting strategies: in some, there’s only one person in charge of creating internal reports. In others, every team member has to make a report on a weekly or monthly basis and report to the manager.

Sometimes, internal reports contain confidential information and their main purpose is to guide the managers. That’s why internal reporting is never meant to be available to external collaborators or the public.

Why Is Internal Reporting Important?

Internal reports provide managers with critical information about how their teams are performing, so they can make data-driven decisions and steer the business.

A well-designed report can help you determine what your strengths are and in what area of business you’re doing well. At the same time, you can determine where you’ve made mistakes and create an actionable plan to eliminate them in the future.

Internal reporting also helps each team member determine what they’re responsible for and what they’re expected to do. Once a campaign or an activity is over, a detailed report on it can help teams pinpoint exactly where things went south or what specific action brought great results.

Edward Mellett of Wikijob also highlights the importance of “internal communication”, which is a part of any internal report. A reporting meeting allows teams to “exchange information, knowledge, ideas, and beliefs among firm employees. It improves efficiency, and goals are easily attained,” says Mellet.

What Is Meant by External Reporting?

External reports are meant to be shared with the public – either broader audiences or your clients, investors, external partners, etc.

In many cases, the main focus of external reporting is financial data – especially if you need to justify your spending to the client and showcase the ROI of your activities. If that’s the case, it’s critical to filter the information you’re including in the report to avoid any confidential info that mustn’t be shared outside of your company.

External reports are sometimes used for marketing purposes, for example, to serve as a foundation for a company’s writer to write a case study or an article.

Companies may structure their external reports in different ways, but common practice is to state the goal of the report at the very beginning of the text since the audience reading it will be broader than in internal reporting.

Why External Reporting Matters

External reports can serve a variety of purposes. For instance, they may be proof of your company’s health for industry experts and analysts.

However, the main purpose for most companies is to make information available to shareholders and attract potential customers and investors. If you’re reporting to a client, it may be a good opportunity to showcase the excellent results you’ve achieved and the positive effects for the client.

Different financial reports can also be external and made public, but they don’t include confidential information. Some of these reports are even required by the law in some countries.

For many marketers, external reporting is a regular part of the job. They need to share reports with their clients, partners, or sponsors, typically on a weekly, monthly, or annual basis. These reports usually contain the most important data without going too much into detail so the client can easily understand the charts and numbers.

It’s important to emphasize that both internal and external reports are equally critical for a business. Sometimes, internal reports don’t get enough attention, according to Gerrit Buss of FourManagement GmbH. “I am convinced that the quality of the internal and external reports cannot differ when they are generated,” says Buss.

“I have often seen that internal reports are not created with the same passion and quality as external reports. But this is absolutely wrong because the reports should also be used internally to initiate improvement measures.”

Internal vs. External Reporting: The Differences

We asked over 35 experts to explain the primary differences between internal and external reports and how they use both in business. Here are the main aspects of contrast between internal and external reporting.

The Purpose of the Report

“The main difference between internal and external reporting is what their purpose is,” says Irene Wambui Muchai of Online Optimism. And to meet their purposes, reports need to present different data and organize it in a different way.

“For internal reporting, it’s more private – we are pulling data and other information together to make decisions within the organization. External reports offer information that specifically relates to what the clients, sponsors, or partners need to know. The data is more focused on their specific needs, such as client goals, ad budget spending, and success rates,” explains Wambui Muchai and adds that this way, no one has to waste time listening to data they’re not interested in.

Olivia Tan of CocoFax agrees that the objectives of the person you’re presenting to are different when you’re reporting internally and externally, so it affects what data you’ll choose to present. The report should always be aligned with what your colleagues and managers, or clients want to achieve.

“In a client’s case, you need to avoid the technical terms and focus on delivering the reports in a simplified way. You do not want to share technical details as the client wants to focus on the results only,” says Tan.

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How Detailed the Report Is

When reporting internally, you’re presenting to people who are already familiar with the topic and details are necessary if you want to improve your strategy or identify errors. However, when you’re presenting to a client – externally – you may need to avoid getting too much into details and make your report to the point.

“When reporting internally you don’t need to educate your colleagues about your work, but when reporting externally you often do,” confirms Brad Touesnard of SpinupWP. “Clients may not understand the relevance of various key performance indicators (KPI), so you need to explain what each KPI means and why they are important for their bottom line. By having a better insight into your process, clients will have a better understanding of the value you are providing and what they can reasonably expect.”

Alina Clark of CocoDoc says that you “can be as technical as possible while delivering internal reports. After all, the people in the room are more often than not, the internal teams who get the gist of the conversation even if it’s technical.”

“On the other hand, an external report needs you to break down the report into understandable bits. Technical talk is therefore a no-go zone when handling external reports. Your clients or partners may not even understand the written report unless you explain the numbers to them,” claims Clark.

Andre Oentoro shares how they handle reporting at Milkwhale. “With our colleagues, we tend to be more detail-oriented and never leave anything out. So, we discuss pretty much every point. With clients, we filter the information we gather so we don’t bombard them with too many points and avoid confusing them. So, we only include the most important details and points.”

External reports “are shorter, include simpler language, and highlight key takeaways, whereas the internal reports are more elaborate, descriptive, and longer,” adds Gregory Rozdeba of Dundas Life, and summarizes very well the difference in complexity of internal and external reports.

How Often You Create the Report

Here’s another difference between internal and external reports.

“Internal auditing is a continual and ongoing procedure, whereas external auditing is done once a year,” says Rameez Usmani of Code Signing Store. That means you’ll need to create internal reports more often to make sure your marketing activities or any other business operations are performing well.

On the other hand, you may create external reports on an annual basis, depending on who you’re reporting to.

How You Present the Data

The way you present your data also varies between internal and external reports. In external reports, it also matters how you’ll present the data, according to Nelson Sherwin of PEO Companies. Sherwin says that “data presented externally need to look good, not just in the numbers, but on the page. We hire a dedicated graphic designer to do our quarterly and annual reports so that the layout is fluent and so that readers are directed at the numbers we want to stand out.”

Will Cannon of Signaturely Inc. suggests that “the best and efficient way to convey thoughts to an in-office team is to make detailed and bulleted points reports. It should not only be conveyed in physical presence – if possible – but the report should be sent via official emails of the entire concerned staff.” On the other hand, external reports should be simpler because they’re meant for clients who may not have the necessary knowledge of your business. These “should have easier wordings and tone, as compared to strictly technical in-office reporting,” says Cannon and shares a pretty insightful piece of advice:

“Another great benefit that today’s digital age offers is the use of videos – for remote reporting – when reporting externally to a client. That is very impactful and instantaneous liked by the client.”

In many cases, you need to justify your decisions and budget spends to your clients. Therefore, you need to highlight the positive outcomes and data, says Nathan Hughes of Diggity Marketing.

“In external reporting, you would be presenting the business in a positive light even though there could be internal discrepancies. In internal reporting, you can straight up point out the errors and use a concerned tone as opposed to a persuasive tone when speaking to stakeholders.”

Mayuri Flanagan of Global Green Family adds that external reports are slightly more formal than internal ones. “Internal reports should still remain professional and free of offensive or abusive language,” explains Flanagan. “External reports, on the other hand, are one tier more professional and is mainly about choosing the right words and how to deliver them for the success of client meetings and negotiations involving sponsors and partners.”

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How Much You Need to Prepare

As internal reporting uses slightly less formal language and the way of presenting the data, it also requires less preparation. If done often, for example, daily or weekly, internal reports are focused on analyzing the data way more than on the way it’s presented.

Natasha Rei of Explainerd confirms “preparation is one of the biggest differences when reporting to external parties.” 

“The internal report has its own timeline that we can trace back pretty easily. So, when we make the internal report, we can then check our past assessment and continue from it. Since we have the previous report to compare, it’s easier to compile all the effort we have made in the recent days. On the other hand, the external report requires a huge preparation. Working with clients means that we have to prepare the status update every here and then. Compiling all the progress and its changes can drain you more than preparing for an internal report where everyone is aware of what will be presented by the meeting day,” explains Rei.

Our survey confirms that preparing external reports is more demanding. Exactly half of our respondents said that external reports require allocating more resources, while 26% of participants believe these reports take an equal amount of effort to prepare.

The most demanding types of report to create

What Data You Emphasize

What type of data will you highlight in your report? It depends on who you’re reporting to – whether you’re creating an internal or external report.

Lily Ugbaja of Dollar creed singles out the point of emphasis based on different needs as “the biggest difference between reporting internally and externally.”

“This means that for internal reporting, the focus is on how to do better, what loopholes should be closed and what strategies should be adopted,” says Ugbaja.

“While for external reporting, clients are interested in knowing what you’ve done and how it positively affects them. In summary, internal reporting is more about “how” (how can we get better, how do we achieve this) while external reporting is more about “what” (what have you done? What was the outcome, what are the figures etc).”

Here’s what our survey showed when it comes to the contents of internal and external reports. Most external ones are financial and marketing reports (almost 80% of respondents), followed by status and sales reports (around 60%). The most common types of internal reports are also done in marketing (around 55%) and finances (around 50%), but our respondents also often create internal status reports (also around 50%).

Internally used vs externally used reports

Sasha Matviienko of Growth360 says that “external reports typically include general KPI metrics – e.g. Clicks, Leads, and Sales, internal reports will include more of the business metrics that help put things into perspective.”

There will also be some data that you can’t share externally. “Brands we work with construct their internal reports to include things that are never shared externally,” confirms Matviienko. “For example, Customer Lifetime Value, Referral Rate, and Return Rate. While for us, internally, we look at numbers that matter for us – overall performance, utilization, etc.”

That’s why Yoann Bierling of YB Digital says you need to consider external reporting quite carefully to avoid breaching confidentiality. “Internal reporting can contain all kind of useful business information, including client names or performance values. However, external reporting always has to be carefully considered, not only in terms of information confidentiality, but also in terms of possible implications,” explains Bierling.

“Always ask yourself if by seeing the external report you are creating as someone that doesn’t know your business at all, would it somehow give you a better opinion of your company? If that isn’t the case, for any reason (information, results, confidentiality, or anything else), then the report should be reviewed.”

In some companies, however, there isn’t a huge difference when it comes to internal vs. external reporting. For example, ClydeBank Media LLC. John Donnachie explains that “the only significant difference is that when reporting to external stakeholders we always emphasize added value. Every reporting instance is an opportunity to further enhance the relationship and emphasize the value we add. Internal reporting is less focused on value-added activities and more about how we are progressing relative to our goals.”

What You Do After

Having an actionable plan should be the goal of every reporting meeting, regardless of it being internal or external. What are you going to do about the data you’ve collected?

Marc Fisher of Dogtown Media says that it’s critical to be intentional with your time when reporting internally.

“Take detailed notes and action items associated with each item. This allows our team to know what objectives they are responsible for and when those action items need to be fulfilled.” So, after an internal meeting, it’s crucial for each team member to know exactly what they’re in charge of.

On the other hand, getting the client’s feedback is essential after presenting an external report. “When reporting externally to clients, it’s very important that we relay to them everything that we need feedback on and ask for it in a reasonable time,” says Fisher. “Further, here we also aim to have very detailed action items that are required of both our team as well as our asks for reporting to our clients.”

Internal vs. External Reporting: What’s More Important?

As you’ve seen, both internal and external reports have their specific purposes, audiences, and ways they’re done efficiently. There’s no telling which type matters more than the other, as both internal and external reporting can be crucial for your business.

Internal reporting helps you evaluate your performance and identify your pitfalls and strong suits so you can go forward avoiding your past mistakes and replicating what worked well. On the other hand, external reporting helps you keep your current clients happy and attract new ones by showcasing your company’s health.

By putting time, skills, and effort into creating both internal and external reports, you can achieve some truly extraordinary results.

About the author
Stefana Zaric
Stefana Zaric Stefana Zarić is a freelance writer and a teacher fluent in several languages. She has recently started her own business and educates future writers who want to build a career in marketing. When not working, Stefana loves to read books, play with her kid, and dance salsa.
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