There is no question that data is important for businesses, as it is what helps them make informed decisions, set goals, and track progress. However, simply having data is not enough: Businesses must use it in a variety of ways to make it truly valuable.
There are many ways to make sense of data, but one of the most effective is to use data visualization techniques. Data visualization includes charts and graphs like bar charts, line charts, pie charts, and waterfall charts. Keep reading to learn more about waterfall charts, including when to use waterfall reports.
What is a waterfall chart?
A waterfall chart is a graphical representation of data that helps to identify how a particular value is affected by changes in related values. It typically shows how an initial value (e.g., starting balance) is modified over time by changes in related values (e.g., inflows and outflows). The waterfall chart gets its name from the way waterfalls cascade down the page.
Waterfall charts are often used to help explain how a company’s cash flow works or to track the progress of a project. They can be created in a variety of software programs, including Microsoft Excel and Microsoft PowerPoint.
There are a few things to keep in mind when creating a waterfall chart. First, the chart should be easy to read, with clearly labeled axes and data points. Next, the initial value should be at the top of the chart and the final value should be at the bottom. Additionally, values should be positive (e.g., inflows) or negative (e.g., outflows) but should never be zero. And finally, the chart should be as symmetrical as possible.
When should you use waterfall reports?
Waterfall reports are among the most common reports used in businesses and organizations. This is because waterfall charts are ideal for illustrating the flow of money in and out of a business. They can be used to track profits and losses over time and to see how different changes (e.g., increases in sales or changes in production costs) impact the bottom line.
Waterfall charts can also be used to track changes in customer engagement over time. This can help businesses to see which marketing campaigns are most effective and which areas of their business need improvement.
Additionally, waterfall charts can be used to track changes in product sales. This can help businesses to identify which products are selling well and which ones need to be discontinued.
Further, waterfall charts can be used to track changes in production costs over time. This can help businesses to keep track of how their expenses are changing and to identify areas where they could save money.
Finally, waterfall charts can be used to track progress toward specific goals. This can help businesses to stay on track and identify any areas where they need to make adjustments.
What are the challenges of waterfall charts?
Waterfall charts are a very effective way to track growth and identify potential areas of risk. However, they can be challenging to create and difficult to read if not done correctly.
The biggest challenge with waterfall charts is ensuring that the data is accurate. The data needs to be properly aligned, and the columns need to be totaled correctly. If the data is not accurate, the chart will be inaccurate.
Another challenge with waterfall charts is that they can be misleading. The chart can make it look like the values are increasing or decreasing when they are not. It is important to use good judgment when interpreting waterfall charts.
Despite these challenges, waterfall charts are useful tools for visualizing data. When used correctly, they can help you understand the cumulative effect of a series of values.