Data visualization allows analysts to explore and understand their data and quickly spot patterns and trends. Data visualization can also help communicate data findings to stakeholders in a way that is both visually appealing and easy to comprehend.
There are a variety of different data visualisation techniques that can be used, each with its own strengths and weaknesses. Some common techniques are line graphs, bar graphs, scatter plots, and waterfall charts. Continue reading to learn more about waterfall charts and when to use waterfall charts.
What is a waterfall chart?
A waterfall chart is a data visualization tool that is used to track and analyze how a value changes over time. The chart typically starts with a value at the top of the chart. And then shows how that value decreases or increases over time.
A waterfall chart can be a great way to visualize the cumulative effect of positive or negative values on a given total. When used effectively, waterfall charts can provide a clear view of how changes in individual values combine to create a larger outcome.
There are a few key best practices to keep in mind when creating a waterfall chart. The first step in creating a waterfall chart is to calculate the total value that will be represented by the chart. This total can be the result of adding or subtracting a series of positive or negative values. Once the total value has been calculated, list the individual values that contribute to it.
For a waterfall chart, these values will typically be listed in order from largest to smallest. Next, use a series of columns to represent the individual values, with the total value at the top. The columns should be drawn in descending order, with the column for the largest value at the far right.
Finally, use coloring to indicate how the values are related to the total. For example, a green color could be used to indicate positive values. While a red color could be used to indicate negative values.
When should you use a waterfall chart?
Waterfall charts are used to illustrate how a change in one value or calculation leads to a change in another value or calculation. They are often used to show the effect of each step in a series of calculations in the final result.
More specifically, waterfall charts can be used to show changes in financial data. For example, a waterfall chart could be used to show the effect of increasing sales, decreasing costs, or a combination of the two on the profitability of a business.
Waterfall charts can also show the effect of changes in other types of data. For example, a waterfall chart could be used to show the effect of increasing the number of customers. Decreasing the average purchase amount, or a combination of the two on the total number of sales.
One of the primary benefits of waterfall charts is that they are versatile and can be used for a variety of different purposes. Additionally, waterfall charts are easy to understand and provide a high-level overview of how a particular result was achieved. They can be used to illustrate the positive and negative changes that have contributed to a particular outcome and can be helpful in highlighting the progress that has been made toward a specific goal.
What are the disadvantages of a waterfall chart?
While waterfall charts have many advantages, there are a few disadvantages that you will want to be aware of. One disadvantage of waterfall charts is that they can be confusing to viewers who are not familiar with the symbols and terminology used in the chart.
When analyzing financial data, it can also be difficult to track how much money has been raised or spent at each stage of the waterfall. The chart may not be very accurate if the data is not complete or if it is changed over time. And it can be difficult to identify the cause of changes in the waterfall. Finally, the chart may not be very useful if the data is not in chronological order.
Despite these disadvantages, waterfall charts can overall be extremely helpful when trying to understand the overall progress of your company. By looking at the different stages of your company’s waterfall chart. You can easily see where potential improvements can be made.