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Sankey Diagram: why it's an effective way to visualise the P&L

Writer's picture: Chris BarberChris Barber

Updated: Oct 18, 2024

When communicating profitability to those who aren't accustomed to looking at financial data, I believe the 𝐬𝐚𝐧𝐤𝐞𝐲 𝐝𝐢𝐚𝐠𝐫𝐚𝐦 𝐢𝐬 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐞𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞 𝐯𝐢𝐬𝐮𝐚𝐥𝐢𝐬𝐚𝐭𝐢𝐨𝐧. Here's why:


1. 𝐒𝐡𝐨𝐰𝐬 𝐭𝐡𝐞 𝐟𝐥𝐨𝐰 𝐨𝐟 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐟𝐫𝐨𝐦 𝐥𝐞𝐟𝐭 𝐭𝐨 𝐫𝐢𝐠𝐡𝐭

In many cultures, information is read from left to right. The sankey diagram mirrors this flow, starting with how a company generates its revenue (i.e., product revenue) then illustrates what happens with this revenue (i.e., how much ends up allocated to controlling interests)


2. 𝐂𝐥𝐞𝐚𝐫𝐥𝐲 𝐝𝐢𝐬𝐭𝐢𝐧𝐠𝐮𝐢𝐬𝐡𝐞𝐬 𝐤𝐞𝐲 𝐜𝐨𝐦𝐩𝐨𝐧𝐞𝐧𝐭𝐬 𝐭𝐡𝐫𝐨𝐮𝐠𝐡 𝐜𝐨𝐥𝐨𝐮𝐫

Colour coding helps differentiate between the various parts of the P&L; revenue streams (grey), costs (red), and profits (green)


3. 𝐑𝐞𝐯𝐞𝐚𝐥𝐬 𝐭𝐡𝐞 𝐫𝐞𝐥𝐚𝐭𝐢𝐯𝐞 𝐢𝐦𝐩𝐚𝐜𝐭 𝐨𝐟 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭 𝐢𝐭𝐞𝐦𝐬

The sankey diagram shows how each category impacts the overall P&L. For example, it illustrates that product revenue is about half the size of service and other revenue, and approximately one-third of total revenue is allocated to cost of revenue


4. 𝐒𝐮𝐩𝐩𝐨𝐫𝐭𝐬 𝐚 𝐫𝐚𝐠𝐠𝐞𝐝 𝐡𝐢𝐞𝐫𝐚𝐫𝐜𝐡𝐲

The sankey diagram accommodates various levels of detail. For instance, the cost of revenue may be expanded to one further level, while gross profit can be expanded into multiple sublevels, offering flexibility in how much detail is presented


5. 𝐈𝐬 𝐯𝐢𝐬𝐮𝐚𝐥𝐥𝐲 𝐞𝐧𝐠𝐚𝐠𝐢𝐧𝐠

The balance, symmetry, and flow of a sankey diagram make it far more visually appealing than traditional financial tables. This aesthetic quality helps keep the viewer’s attention



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