Budgeting Basics and Beyond

3.1. Types of Reports

Long-term reports may be for the company as a whole or for specific areas. The benefit derived from reports should justify their cost. Budget reports are used for planning, control, and information.

Planning reports may be short term, looking at the company as a whole, each division, each department, and each responsibility center within the department. Short-term planning reports may be of income, cash flow, net assets, and capital expenditures. The reports should be prepared regularly. Special studies may be performed of "problem" segments not performing well. The special studies may be of product or service lines, activities or functions, geographic areas, salesperson performance, and warehousing.

Control reports concentrate on performance effectiveness and areas needing improvement. Budget to actual figures are compared by product, service, territory, and manpower.

Information reports assist in planning and policy formulation. The reports show areas of growth or contraction. They may be in dollars, units, percentages, or ratios. Trends are shown over time. An example of an informative ratio is selling expense to revenue. Informational reports study the trend in earnings, profit by product or service, profit by territory, and profit by customer.

Reports for upper management are comprehensive summaries of overall corporate operations. Top management generally prefers narrative reports. Reports are also prepared for special events of concern to top management. ...