Definition: An internal user is a person inside or an organization that helps run its operations and uses the company’s financial information to make decisions. In other words, an internal user is a manager or someone else inside a company who has access to private, internal knowledge about the company and can use this knowledge to make financial decisions about the business.
What Does Internal User Mean?
Managerial and cost accountants are good examples of internal users. They are managers inside the organization who have knowledge about the inner workings of the company and can use this knowledge to improve the business’ performance. Accountants are the only internal users, however. Managers and employees in all departments, like research and development, purchasing, human resources, and marketing, can be included in this category.
Internal users of financial information are much different than external users. Internal uses are typically managers and people who run the company. They are concerned with using their knowledge about the business to improve performance and increase efficiencies within the company.
External users, on the other hand, are people outside the company like investors and creditors who use the financial information for personal gain. Investors want to make money from their investments and creditors want to see a return on the loans. External users don’t actively manage the company or help improve its operations.
Internal users are legally prohibited from using their private information to make personal gains by buying or selling stock. This is called insider trading. Since insiders have more information than the general public, it is unfair for them to be able to act on it before the financial information becomes public. For example, an executive might know the company is going to go bankrupt six months before it happens, so he sells all of his stock before it is worthless. This isn’t fair to the external users of financial statements.