Why Should You Use a Waterfall Chart?
When it comes to tracking the growth of your business, there are a lot of different factors to take into account. Tracking your growth can help you set goals and measure your progress, and it can help you identify areas of your business that need improvement. If you’re not seeing the growth you expected, it could be an indication that there are some areas of your business that need improvement. By tracking your growth, you can pinpoint the areas that need the most improvement and make the necessary changes. This can help you make better business decisions about where to invest your time and money and whether to expand your business or hire more employees.
If you’re looking for a simple, effective way to track your company’s progress and growth, a waterfall chart is a great option. Keep reading to learn more about waterfall charts and an answer to the question, why use a waterfall chart?
What is a waterfall chart?
A waterfall chart, also known as a cascade chart or bridge chart, is a data visualization tool that helps you track how much money flows in and out of your business over time. The waterfall chart consists of three types of columns: the first column type shows the total inflows (money coming into your business), the second shows the total outflows (money going out of your business), and the third shows the difference between the two (net flow). This type of chart is especially useful for businesses that experience both positive and negative cash flow throughout the year.
When creating a waterfall chart, there are a few best practices to keep in mind:
- Start with the end goal in mind. What do you want to show with your waterfall chart? What is the final result you are trying to illustrate? Work backward from there, breaking down the individual steps needed to get to that final result.
- Keep it simple. Waterfall charts can be very complex, with a lot of data and figures to track. Try to keep your chart as simple as possible, using as few data points as necessary to get your point across.
- Use clear labels and annotations. Waterfall charts can be difficult to follow if the data is not clearly labeled. Make sure to use clear headings and annotations to help explain the data in your chart.
- Use consistent formatting. Waterfall charts can be very busy, so use consistent formatting to make the data easier to follow. This might include using the same color scheme for different data sets or using different line styles to indicate whether a data point is increasing or decreasing.
- Test it out. Before publishing your waterfall chart, be sure to test it out on different viewers. Not everyone will be familiar with how these charts work, so it’s important to make sure the data is easy to follow. Try to explain the chart to someone who is not familiar with it and see if they can easily understand the data.
Why should you use a waterfall chart?
Waterfall charts are a great way to visualize how a change in one value affects the rest of the values in a data set. They can be used to track the cumulative effect of sequenced changes over time or to compare multiple scenarios. Waterfall charts are particularly useful for financial data, where they can be used to track the cumulative effect of income and expenses over time. In this type of waterfall chart, each column represents a different category of income or expense, with the height of the column representing the total value for that category.
Additionally, a waterfall chart can be used to track the cumulative effect of changes in different categories over time. For example, you can use a waterfall chart to track the cumulative effect of increasing or decreasing revenue, expenses, or profit.
Finally, waterfall charts can also be used to compare different scenarios. For example, you can use a waterfall chart to compare the cumulative effect of increasing revenue and decreasing expenses with the cumulative effect of decreasing revenue and increasing expenses.