Business Intelligence Blog from arcplan

Planning Visualizations: Charts That Make Variances Easier to Understand


In my previous post on this topic, I covered why planning visualizations are important for an audience of planners without finance backgrounds: they prioritize content and separate the signal from the noise so planners know at a glance what areas of the plan need their attention. Today I’ll underline the importance of using the right chart types to tell your plan’s story. The idea is that visualizations should enable planners to prioritize the largest areas of their plans and see exactly what parts need adjustment, without forcing them to read anatomically correct financial statements or have a deep understanding of planning terminology.

Particularly, the term “variance” can be incredibly confusing to non-finance department heads who are tasked with managing budgets. Variances of actual spend compared to the budget are either positive or negative, indicating which direction the line item deviates from the plan. In general, being under budget is a positive variance, and being over budget is a negative variance. But things get weird when you’re looking at expenses vs. income and it’s hard for regular planners to make sense of it all. So the best way I can think of to help non-finance planners understand their plan performance better is to simply use terms like “favorable” and “unfavorable” instead of “positive” and “negative” (i.e. “you’ve got an unfavorable variance for airfare because of the unplanned training course in Las Vegas that your whole team attended”) and to introduce planning visualizations that simplify complex concepts like variances.

Horizontal Bar Graph
A horizontal bar graph with red and green bars is an ideal visualization for a budget statement because it’s straightforward and eliminates confusion. In the example here, the budget categories are prioritized from most unfavorable to most favorable. We see that relocation and airline expenses are the most unfavorable – they’re the most over budget – and they are emphasized by being in red at the top of the graph. But reallocating funds from the most favorable categories – incentives and salary – can alleviate the problem. Incentives and salary are the most under budget; we’ve spent less than we’ve planned and there may be funds that can be moved to the relocation and airfare categories.

The horizontal bar graph visualization tells the story of which items are doing well, which items are doing poorly, and makes it obvious where adjustments can be made.

Waterfall or Bridge Chart…

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