Reporting Relevance: Understanding FX Impact Using a Waterfall Chart
Wouter Born
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Waterfall charts are powerful visualizations to show a variance from one point in time to another using a key business dimension.
In this example, we will look at sales analysis where Budget (all values translated at Budget rate) is compared to Current Month Actuals (all values translated at Actual rate) by the main regions. A chart like this gives great insight in how the different regions contributed to the positive variance.
This chart shows USA and Europe are under-performing while South America and Asia are strongly over performing. What this chart does not show is the reasons for the over or under performance.
Could the recent drop of the GBP cause this under performance?
If we exclude the Foreign Exchange (FX) Rate impact from the individual region variances, we see a different picture for the Europe region. Europe was $11M under-performing compared to budget, but when we compare their actual performance to the sales budget with actuals recalculated at budget exchange rates, we see that they are over performing on their sales budget.
The reason why Europe shows a green bar (over performing) of $6M is because the recent drop of the British Pound (GBP). The budget was calculated on a higher GBP exchange rate, but the actual sales volume was not under budget.
By explaining the FX impact in a separate bar, you can separate ‘normal’ business performance from external factors like FX impact.
Waterfall charts with sub totals (like Actual at Budget Rate in this picture) are available in CXO-Cockpit version 6.1.
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8 年I really like this analysis Wouter, as it allows the finance user to view additional information within a traditional waterfall chart and provides the reader with additional context on what is actually going on within the numbers. CXO-cockpit really does help the CFO and the office of finance to evaluate their company financial performance in order to make more informed management decisions.