Graphs and Charts Can Show Your Financial Picture

This article is contributed by Jason Swift.

Communicating detailed financial information is unfortunately a necessary evil of business and often something that we can’t avoid. However this can be very difficult when we are trying to speak to a person or a group of people who don’t know much about finances or who find it boring, and it’s even more difficult to make this information engaging or interesting.

a picture is worth a thousand words

Fortunately we do have one useful tool at our disposal for quickly communicating financial information to large groups – and that’s graphs and charts. This gives us a perfect way to visualize detailed information and to provide an overview that looks at the bigger picture without forgetting the smaller details. It can be highly useful also for presentations, annual reports, meetings and marketing. Here we will look at how to use it.

Capturing the Raw Data

raw data

First of all you need data, and collecting data is something that every company should be doing actively. The more you measure profits, losses and every other bit of financial information, the more you will be able to tell which direction your business is going in and what needs to change to bring about the biggest improvements. Collect information on every cash outflow and every income stream and on the most significant measures of performance.

From here you can then input this information into spreadsheet software such as Excel and this will allow you to keep track of it, and to use it to create a graph. Simply select the information you are interested in and choose to make a graph from it. Now from here you have many different options to choose from…

Line Graph

line graph

A line graph or a plot graph are particularly useful for communicating how something has changed over time and can also be useful for plotting how they might continue to change in the future. Line graphs will automatically show patterns and they will show directions, and this means for instance that you can show how your overall finances have increased or dipped over the last month to inspire or motivate your team. Likewise you can also split your lines up into multiple different figures so that people can compare directly the difference between departments and then put this in context relative to the overall profits.

Pie Charts

pie chart

Pie charts are particularly useful for showing percentages and this means you can give a snap shot of where your revenue is coming from, which product lines are performing best, or which departments are costing the most money. It only gives you a snapshot in time but it can be a very dramatic way to show which areas need improvement or more focus.

Bar Charts

bar chart

Bar charts are similar to pie charts and can allow you to compare various different elements on a set scale – such as which products sold the most over a set period. When the differences are more subtle, you will find that bar charts are slightly more illuminating than pie charts.

Tips

When choosing the right graph, think about your audience as well as the data you are trying to communicate. Make sure of course that you use colors that will stand out clearly but at the same time don’t condescend to your audience as this will undoubtedly create a negative reaction.

Of course bear in mind that you will probably have an ulterior motive when you create your charts and graphs, so think about which information you want to include and how, by selecting only a certain month, or portraying the information in a particular way, you can make it a lot easier to communicate your message to investors or bosses…

Author Bio: Jason Swift is an expert in giving accounting advices. He writes articles on annual report awards and reporting which helps you out in finance dealing issues.

Photo credit: ElizabethHudy via photo pin cc

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