Much of what we do at Cubewise involves assisting our clients to analyse business problems and that invariably involves presentation of data. Many of our customers are finance departments and one graphic that many finance and planning departments are obsessed with is the waterfall chart, also variously known as the "earnings walk." The purpose of this chart is often to illustrate the reasons for variation between profit from one year to the next, or as in the following simplified example, to illustrate the flow from revenue to net income.

There are a few problems with waterfall charts. Anyone who has ever had to do one knows that Excel does not provide native functionality to do these charts and therefore every accounting firm, management consultancy and finance department has their own template complete with data input ranges and data series with "blank" formatting in order to massage data into the format required to "trick" Excel into producing a waterfall chart. However, that's not the issue I want to focus on. These charts, although almost universal are prime examples of bad design, they take up a lot of screen or printed report "real estate", yet convey little actual information and are often difficult to interpret due to the layout and volume of white space.

Let's start with a typical waterfall chart:
OK, so how might we go about improving this chart to make it a more effective data visualisation?

STEP 1.
Remove the chart title and flip the chart on it's side to make it into a "horizontal waterfall".
Right now you might be thinking "what the ...?" but bear with me!

STEP 2.
Remove the axes which are cluttering up the chart but conveying little information

STEP 3.
Let's remove the data labels which are difficult to read and place them in a table next to the row items. Our original walk chart is now laid out much like we would normally read a P&L but with a visual representation of scale on various profit effects. Notice how it is much easier to scan down rows of horizontal bars than across columns to see size relativity.

STEP 4. (final step)
Shrink the graphic down so that it can be presented in line with the actual tabular report as part of the spreadsheet or dashboard. Each value is now effectively represented by a "sparkline."

The same information is now displayed in about ¼ the space of the original chart but yet in a more impactful and easy to interpret way:
• Horizontal bars representing the dollar value scale are now lined up vertically which makes it easier to accurately interpret size variations
• Series values are now lined up with the series names so the reader's eye doesn't have to jump around, it is easy to scan down the graphic
• The data is presented as a finance reader would usually expect to see a financial result
• There is no unnecessary clutter from chart titles and axes!

More impact in far less space! I know which one I prefer but which one do you like best?

Please contact your Cubewise consultant for more tips on effective data visualisation.

For more resources on efficient and effective ways to display business data see these websites
Stephen Few, Perceptual Edge (author of "Information Dashboard Design" and "Show Me the Numbers" and consultant to most of the big BI companies)
Peltier Tech (John Peltier's website, Excel MVP and charting expert)
Excel Charts blog (Jorge Camoes' blog, a balanced view between the demands for business charts and data visualisation best practices)
Bissantz blog (musings on effective data visualisation and charts contains a very similar example to the one above)
Edward Tufte (credited with inventing sparklines and author of "The Visual Display of Quantitative Information")