The art of charts: Choosing the right chart to tell your story

It’s the end of the month. You just closed the books and it’s time to prepare your next financial report. You read my article on the importance of data visualization, and you want to be a better host of this financial information so your readers can engage with it.

First, tell a compelling story

Just like our favorite books and TV shows, the compelling storylines are the ones that grab our attention. Our financial information is no different. In the visualization world, we find the most engaging stories are ones that:

Raise an alarm:

• A sudden drop in revenue.
• Cash reserves falling below set thresholds.
• Expenses higher than expected. 

Trumpet a success:

• Surpassing a revenue goal
• Reducing accounts receivable days’ turnover.

Recommend action:

• Explore additional financing or line of credit usage.
• Examine product pricing to cover additional costs of staffing.

In my work advising nonprofits at YPTC, I regularly meet with clients to understand their pain points and determine the questions that are central to their financial sustainability. I use these as the basis for my chart design.

If you are not sure where to start finding your stories, here are five questions you could consider the next time you review a client’s financial information:

1. What has changed significantly? This month? This year?
2. What are the trends emerging from the data?
3. What caused the changes?
4. How far are we from our goals? Do we need to make any adjustments?
5. Are there recurring questions and how does this new data inform the answer?

When you have decided which story you want to tell, the next step is to make sure you have some evidence to support your story. It needs to be measurable and quantifiable. While you need numbers, you also need comparisons. A number alone does not make a good story. Let’s say a business made $100,000 in income this year. That is one number, but when compared to something such as last year’s income, which was $1 million—now I have a story. This is the beginning of a good chart!

Pick the right shape for your chart

Every type of chart serves a different purpose and not all of them are equal. Knowing the function of each chart will help you pick the best one to tell your story.

Bar charts

Great for: When you compare two or more pieces of data.

Common use cases: Budget vs. actuals, year-over-year comparisons, category comparisons.

When to use: Bar charts are the workhorse of the data visualization world because they are great at explicitly comparing values by magnitude. The longer the bar, the bigger the magnitude. Whether horizontal or vertical, their shape is something our eyes quickly understand, which is why they are so common and helpful.

When you need to compare information in more detail, a bullet bar chart might help. For instance, when working with a nonprofit school that had just opened its doors, we used a bullet bar chart to show per-student costs versus income. This chart worked well to illustrate how critical reaching full enrollment was to the school’s sustainability.

Stacking bar charts

Great for: When you compare totals plus subcomponents.

Common use cases: Revenue by type or expense by type; cost of goods sold by component over time.

When to use: These more sophisticated bar charts add an additional element: parts of the whole. The key to stacking bar charts is to only break out one element, and to place it at the bottom to help your reader’s eyes make the comparisons.

The following examples show data around an organization’s supplies costs compared to overall costs. You can display the data in this type of chart in one of two ways: as a dollar value or a percentage of the whole.

This chart shows the segments as a dollar value, focusing on the fact that supplies costs remain relatively unchanged.

The next chart shows the stack as a percentage of the whole, focusing on the growing portion of overall costs that supplies are becoming.

The choice comes down to what story you think is most important to tell. In fact, if you decide to focus on the reduction of overall costs, you don’t need those stacking components at all and can use a regular bar chart.

Line charts

Great for: Showing trends over time.

Common use cases: Cash flow changes and forecasts, revenue performance, cost trends, scenario modeling.

When to use: Line charts work well when we want to present our data in a specific order, such as showing change over time. The slope of the line helps us quickly see changes and trends. This is why line charts are great for things like cash flows, forecasts, and scenario planning.

A good line chart strategically uses labels, color, and shading to help boost the story’s message, and we often try to do this directly on the chart instead of using external legends and labels.

Pie charts

Great for: Demonstrating one significantly small/large part of a whole. That’s it.

Common use cases: Ratios, such as debt to equity, overhead to total expenses; top customer’s percentage of total sales.

When to use: Although pie charts are common, most data visualists avoid them. Why? Their shape prevents easy comparisons of the elements. As a reminder from our first article, looking at these two graphics, it’s very difficult to determine which group of users is the largest when using the pie-shape form, especially with subtle differences. Bar charts are better for this purpose, as you can see in the second visual below.

One time when pie charts can be effective is when you want to show one specific part of a whole and its size. We also help the eyes compare by removing the middle area, making a donut chart.

Bringing it together

Data storytelling is all about being intentional. Decisions such as focusing on a singular compelling story, gathering the right evidence, and choosing the right chart type make a world of difference for our readers. It helps them focus on the best parts of our financial data so they can use it to make business decisions.

Once you’ve chosen your chart, check out our next post where we help you fine-tune your data storytelling with uncluttered and poignant charts that will make your work indispensable.

Missed our first post and not sure why data visualization is so important? Check out my first article on why our audiences need us to be good hosts of our data, as well as my third article about how to keep clients engaged, month after month.