Your company’s financial health, flow, and fluidity will ultimately determine its long-term performance, which is why it’s critical to keep track of your finances carefully, thoroughly, and precisely.
In our data-driven digital age, ‘business intelligence companies are those that can collect, analyze, and exploit the insights which are most important to their long-term commercial objectives are the ones that will prosper. In operational processes of business, online data visualization is taking primacy, resulting in more efficient and speedier workplaces.
In a world where every person on the planet will generate around 1.7 megabytes of new data per second in less than two years, businesses that want to keep their financial affairs in order need access to KPI dashboards with financial graphs and charts that are digestible, accurate, and provide the level of insight needed to increase efficiency and avoid potential pitfalls before they happen.
What Are Financial Graphs?
The financial graphs and charts physically assess stability, budgeting, spending, cash flow, and a variety of other financial variables, assisting businesses in avoiding a financial crisis by using real-time financial data and providing a complete picture of financial data.
Conducting regular financial analyses and ensuring the greatest quality of data management must be the top priority for businesses of any size to achieve the best possible performance and financial health. If the finance department raises an alert, everyone must pay close attention because it involves the most critical information and, if ignored, might result in significant consequences. As a result, financial charts and graphs must be constructed with extreme caution and attention. Let’s take a closer look at this.
Why Do You Need Financial Analysis Graphs?
Financial data is so complex that it is very difficult for the average person to understand. Although their complexity is reduced by the division and arrangement of mathematics, they are not easily understood by ordinary people. When a lot of data is presented in diagrams, it becomes easier to understand and capture. Mathematicians have long recognized the value of the explicit presentation.
It enables us to present data in a simple, clear, and effective way, provides attractive and impressive visual simplification of data complexity, and provides easy comparisons of two or more situations. It does not require special mathematical knowledge to understand the graph provides a basis for obtaining financial measurements, such as median, mode, quartiles, etc. besides being simple, it saves time and energy for financial data.
The picture method is probably the easiest way to present. it represents any potential trend and predicts the direction in which the trend may change which helps to analyze shortcomings and make effective decisions.
We respond to and process visual data better than any other type of data as humans. Well-designed finance graphs and charts, on the other hand, are the finest answer for processing and acting on key financial measurements and insights.
When it comes to visual aids of this type, three rules apply, according to Illinois State University: graphs and charts should represent clear information, significant facts, and currently stated insights in the most efficient method feasible.
Here are points for which financial graphs are needed:
- You’ll be able to easily and visibly manage your liquidity, cash flow, budgets, and spending, as well as automate operations that were previously done manually and with a higher chance of mistakes.
- Determining the optimum financial KPIs for your organization will allow you to create important financial objectives that will lead to development and success. While there are a plethora of charts available, we’ll go through the most important ones for every firm.
- No matter what measure you need to add and evaluate, you’ll be able to make sense of all the financial data and metrics since they’ll be broken into actionable categories and displayed in an understandable, scannable format.
- In today’s rapidly, competitive, and data-rich commercial sector, pen and paper or passive data will no longer be appropriate. As previously said, human labor is prone to errors, which may be readily avoided by utilizing self-service analytics software.
Busy finance departments will be able to make sense of the insights in front of them, resulting in success and evolution, rather than being bogged down with mountains of meaningless and convoluted data, by leveraging the power of robust graphs that give accurate, trustable, and transparent financial insights.
You may begin by making a simple income vs. expenditures graph, then add other charts that are important to your financial narrative, and eventually develop a panel that displays all of your data on one screen. Let’s take a closer look at this.
Which chart type is best suited for displaying annual financial data for a 10-year period?
Although there are several graphs considered suited for different scenarios, each graph is situation-dependent. It is up to you whether to choose a bar graph or line graph. Each one of them discusses its own effectiveness. Nonetheless, after the yearlong experience, some business analysts recommend that Bar Graph is best suited for displaying annual financial data for a 10-year period.
What is a Bar Graph & Why it is best suited for illustration of long-year data?
A bar graph is a commonly used chart kind for the illustration of graphical data with different categories. You can also insert data into groups. Bar graph consists of numerous rectangles hailed from a common baseline. The range of each rectangle is substantial to the value it depicts.
In other simple words, in a bar chart, the data is deciphered by length. Human eyes are very vigilant at weighing lengths when categories are aligned, making bar graphs easy to grasp. That is just one of the best reasons that bar charts are adopted more commonly.
Other Good Reasons to Use Bar Charts
- Bar charts can display each data type in a frequency attribution.
- Bar Charts are best to depict relative integers or fractions of multiple numerical categories.
- Bar Charts are best to summarize a huge dataset in a pictorial format
- It dominates trends rather than do tables
- Easy estimation for key values at a glance
- Bar charts allow a visual view of the accuracy and conclusion of calculations
- Bar charts are easy to interpret and understand thanks to widespread adoption in commercial and electronic and print media.
How to make a chart for displaying annual financial data for a 10-year period?
Although there is no specific rule to construct a chart for displaying annual financial data for 10 years, however, you can adopt the following useful tips which you can follow to build up the chart.
1. Choose the best Chart Type:
Always be prudent to choose the best suitable charts for your calculation. As earlier discussed, bar charts are best for displaying graphs for an infographic illustration of the data.
Moreover, while getting started with settling with the design elements, you should be sure that your data is shown inappropriately optimal format. Bar, pie, and line charts each one of them depicts categorical data with a different approach, so you need to choose the one that best suits the purpose you mean to illustrate. Always sort your graph in descending or chronological sequence so that it should be simple, elucidate, and easy to interpret.
2. Remove Meaningless Axis
You should be concise and clear while displaying a graph. Thus, be up to the mark to display only what is meaningful and closer to the purpose of illustration.
You should use a bar chart for absolute integers such as net sales and an axis to show percentages. For example, gross profit, net income or budget. There are two various y-axes, one for the absolute amounts and the other for the percentage. In the lateral chart, you can presume that it becomes much more graspable when datasets are illustrated on the series itself, rather than using both axes. It is easier to make sense and there is more area to display the chart with bars.
3. Clean up Financial Chart
Now it is the part of your graph construction that you should clean up unnecessary spaces, categories, and datasets just to make the chart concise and up to the standard. As concise your charts are, as more it can relate the sense of graph with an illustration. You might have multiple data points; you should not use markers – it is a good approach to add an average rate along with minimum or maximum to make your data easier to interpret. Consider wiping up the background axis and extra lines that distract a viewer from perusing the most important objects in the graph.
Highlight Noticeable Events In The Charts
You should make sure that all areas and elements with significant positions have been highlighted. There is nothing wrong to use highlighters or colorful markers. Make sure the consistency amongst the events has properly got displayed. Ask a third person to tell what he notices instantly. This way, you can ensure how perfect your charts are to grasp by a novice or third person.
General Rule For Constructing Graphs
When drawing financial data, the following rules and guidelines must be followed
Appropriate Title: There should be a suitable topic (for each topic should be a simple, clear, and descriptive graph.
Structure: It also determines which variables are independent and which are dependent. Independent rotation should always be placed on a horizontal axis and variations depending on the vertical axis.
Axis measurement: Horizontal and vertical dimensions should be carefully selected to provide the best graphical appearance. Presumably, the straight line should be 1 ½ times horizontally.
Scale Selection: In drawing graphs, an important decision is the selection of scales. The scale should be such that we can receive all the data.
Mention Scale: The selected scale should be released at the top right of the graph paper.
Use of False Basic Line: The principle of drawing a graph is that the exact scale should start from zero. However, if the fluctuations in volatility are very small and it is desirable to detect these fluctuations in the correct order, a false baseline is used. This can be done if, instead, the whole scale from ‘zero’ to the ‘highest value’ involved is shown, only as shown as necessary for the purpose. The part between the ‘zero’ and the “very low value” variable is left out.
Line Designs: If more than one variable is included in the same graph, it is necessary to separate them into different lines i.e., dotted lines, broken lines, dots, dot-cum-dash, thick lines, dashes with dashes, etc.
Index: When different lines are drawn, they should be accompanied by an index where they should clearly indicate which line represents what is dynamic.
Use of Scale: To indicate relative proportions in size, a scale or log arithmetic scale should be used.
Data Sources: The source of information should be mentioned as footnotes.
In signing off this in-depth insight on data graphical charts, we will say bar charts are the best to present data. It depends on your requirement and how complex and long your data is. There are a couple of factors while choosing the best-suited graph charts discussed earlier. To revise again see the data flow and length. That is where you come up with an idea that both line graph and bar graph are best to go for data presentation.