Business Charts Tips: What charts should you use?
Charts are used for creating visual explanation of data and presenting business information in a simple and easy to understand way. When preparing business reports or business presentations the first step is deciding on the format of the charts you are going to use.
You should work with those charts which can communicate the message in the most effective way. When deciding on the charts you are going to use you need to take into consideration the business information you need to deliver, the audience for the presentation or the business report users.
Charts are tools used to simplify reporting and they should be appropriate to clearly communicate the message. Try to avoid using complex charts which would be difficult to understand by the user. For most business reports and charts when the users see the chart they should be able to understand the message in a few seconds.
If you are creating a chart and your chart is getting complex for the user you might want to consider using another chart, more than one chart or maybe using a table instead of a chart to communicate your message.
Frequently Used Charts in Business:
Line Chart is frequently used in business reporting to show trends over some period of time. For example, you can use line chart to show the trend in revenue for your business. Line Charts are also used for more than one variable and are good tools for comparing two or more trends over the same period of time.
For example, you can use Line Chart to show and compare revenue for three products (Product A, Product B and Product C) over same period of time or you can compare the Advertising Cost and Product Revenue over the same period of time.
Column Chart is frequently used in business reporting to show trends over some period of time however not for large ranges. Column Chart is especially effective when you want to show trend or make a comparison over small ranges for example few months, quarters or years. In these cases Column Chart in many cases is more effective than the Line Chart.
You can use the Column Chart to how one variable or show and compare more than one variable. For example, you can use Column Chart to show the revenue over the last five years or compare revenue and profit for the last five years. Histogram Chart is a special type of Column Chart. Pareto Chart is combination chart of Column Chart and Line Chart.
Bar Chart is similar to Column Chart (“horizontal column chart”). Bar Charts are very useful for making comparisons and in some cases they have advantage over the Column Chart because Bar Charts can visually show the variables and titles in more effective way.
Bar Charts can be used to show trends over time in a similar way the Column Charts are used but also Bar Charts can be used to make a comparison between variables at one point in time (similar application to Pie Chart)
Area Chart has a similar application to the Line Chart and in most cases you can use either Area Chart or the Line Chart to show trends.
The advantage of the Area Chart compared to the Line Chart is that sometimes users can recognize trends faster and Area Charts can be visually more effective. However when you want to compare many variables Area Charts can be difficult to read so you might consider using Line Charts instead of Area Charts.
XY Chart or Scatter Chart is used for showing relationships between variables. The X and Y axes use set of variables and the XY Chart visually shows if there is a relationship and how strong is the relationship between the variables.
For example, the Scatter Chart can show the relationship between number of operators in a call center and customer waiting time. Another example is using the Scatter Chart to show the relationship between advertising expenditures and number of new customers.
Radar Chart is used for making comparison of different categories on the same scale. Another application of the Radar Chart is for performing a gap analysis (comparing actual and desired / target values).
Combination Charts use more than one chart type. For example, the Pareto Chart uses both the line chart type and the column chart type together. Combinations Charts can be very effective when you want to show two different variables or two different measures for the same variable.
Pie Chart is used for making comparisons and showing proportions. For example, Pie Chart is used for showing market share of different businesses or products. Pie Charts are very effective when you visually compare a few categories but Pie Charts are not used for comparing many categories. When you have many categories you might consider using a Bar Chart instead of Pie Chart.
Histogram Chart is used for summarizing information from a data which was collected over some period of time and visually showing the frequency distribution. The advantage of the Histogram Chart is the ability to visually display large data in a simple to understand way. The Histogram Chart shows the variation and shape of the frequency distribution foe some period of time.
Pareto Chart is based on the Pareto Principle and it is used for making comparison / ranking different categories. Pareto Chart is similar to the Histogram Chart but Pareto Chart is a Combination Chart and has additional Line Chart showing the cumulative percentages.
The Pareto Chart is used for identifying major problems and opportunities and helps business users to focus their efforts on the greatest potential for improving the business.