Data Flow Diagram: How to Visualize Process Improvement

How companies use data flow diagrams

Data flow diagrams help businesses solve everyday problems and improve their operations. Here’s how.

• Improving business processes: Imagine a customer’s order gets stuck because it needs approval from multiple people. A data flow diagram shows you where the holdups are so you can fix the process and get orders out faster.
• Designing software programs: Let’s say you’re making a new app to keep track of your customers. A data flow diagram helps you plan how the app collects, stores, and uses customer information.
• Improving communication: Explaining a complicated process to a new employee can be tricky. A data flow diagram is a simple visual guide that shows how things work, making it easier to understand.
• Enhancing customer experience: Analyzing the flow of customer data can reveal pain points in the customer’s journey. For example, a data flow diagram might show that your return process is too confusing. Once you identify the problem, you can simplify the process and keep your customers happy.
• Ensuring compliance and security: Data flow diagrams help you see how sensitive information, like credit card numbers or medical records, moves within your company. Tracking sensitive information like this ensures you follow the rules and protect data from hackers.

By mapping out how information moves, data flow diagrams help businesses work smarter, not harder. They’re the key to fixing slow workflows, improving teamwork, and creating a better customer experience.

Types of data flow diagrams

When creating data flow diagrams, you have 2 choices: logical and physical. A logical data flow diagram helps define a process, while a physical data flow diagram shows how it works in practice. Let’s look at each type in more detail.

Logical data flow diagram

Think of logical data flow diagrams as the big picture view. They show how data flows and transforms without getting into the details of how it happens. For example, a logical diagram might simply show “Process Customer Order” without saying whether the order comes from a website, phone call, or in-person purchase.

Physical data flow diagram

Physical data flow diagrams get into the specifics of how information moves through the system. They show software, databases, and people at each step. Take the customer order example. A physical diagram would show that the order goes into sales software, gets processed in the inventory system, and gets saved in the customer database.

Four components of a data flow diagram

Every data flow diagram uses 4 basic building blocks that map out how information moves. These elements show where data comes from, where it goes, and what happens along the way.   

External entity

An external entity is anything interacting with your system from the outside. They’re like the actors in your data story. For instance, a customer placing an order, a supplier delivering goods, or even another company sending information. They can also be other computer systems that talk to yours.

External entities send or receive information but don’t process or change it. They’re just the starting or ending points in your data’s journey. Most diagrams show these entities as rectangles or ovals, though UML uses a stick figure instead.   

Process

A process is any action that changes or organizes data. It takes in information, modifies it, and produces an output flow. Examples include calculating a total price, verifying a login, or sorting customer orders based on business rules.

Each process gets labeled with a short, precise phrase that describes what it does, like “Process payment,” “Send invoice,” or “Update inventory.” You’ll usually see processes shown as a circle, square, or rounded rectangle.  

Data store

A data store is where information stays for later use. Cloud databases, computer files, or even physical filing cabinets serve as these data warehouses.

When processes need information, for example, when checking a customer’s order history, they pull stored data. When they need to save new information or update existing records, like recording a sale or changing a shipping address, they send data to the store.

Most diagrams show data stores as a box with an open side or 2 horizontal lines. The symbol might be labeled “Customer relationship management system (CRM),” “Inventory records,” or “Order history.”

Data flow

A data flow shows how information moves between multiple processes, external entities, and data stores. These flows connect all the pieces of a data flow diagram, mapping out how data travels from beginning to end.

Each data flow label describes the type of data transferred, such as “Customer order,” “Invoice,” or “Payment confirmation.” Arrows represent data flows, showing the direction of movement. Some data flows are one-way, while others are bidirectional.

Data flow diagram levels

Data flow diagrams adapt to your needs. Whether you want a high-level overview or an in-depth breakdown, these levels help you visualize and analyze your system with the right level of detail.   

Level 0: Context diagram

A context diagram shows your entire system at its simplest level. It draws your system as a single process in the middle and then shows how information flows between your system and the outside world.

Consider a vet clinic’s appointment system. At this high-level overview, you have a single process bubble in the middle labeled “Patient scheduling system.” Around it, you’ll find flows leading to and from external entities like:

• Pet owners requesting appointments and receiving confirmations
• Veterinarians providing their schedules and getting daily patient lists
• A booking system tracking appointments and sending reminders 

This overview shows the basics—who interacts with your system and what information moves between them. It sets the stage for more detailed diagrams showing exactly how these major processes work inside the system.

Level 1: Process breakdown

A Level 1 data flow diagram takes a single process from the context diagram and breaks it into smaller subprocesses. Instead of treating the entire system as a single unit, this level shows key processes and how data travels between them.

Going back to the vet clinic’s appointment system, a Level 1 diagram might break down the “Patient scheduling system” into separate processes for:

• Checking available time slots
• Scheduling new appointments
• Managing vet schedules
• Sending appointment reminders
• Updating patient records

Each process transforms data and passes it along to the next step. For example, when a pet owner requests an appointment, the system checks available time slots. If the slot is open, the software system processes the request and updates the vet’s schedule. Then, it sends a reminder to the pet owner and stores the appointment details in a data file for patient records.   

Level 2: Detailed process flow

A Level 2 data flow diagram zooms in even further, showing the steps within each subprocess. This detailed view helps identify bottlenecks, redundancies, and opportunities for improvement in your workflows.

In the “Scheduling new appointments” process from the vet clinic example, specific steps might be:

• Creating or updating patient records
• Checking the pet’s vaccination history
• Matching time slots to visit type
• Coordinating with lab availability

The data flows become more specific, too. Instead of just “Appointment request,” you can see what information moves between steps. For instance, when matching time slots to visit type, you can trace how the system takes the request, finds an open slot long enough for that type of visit, and saves the time in the schedule.

Most businesses stop at Level 2 because going deeper often creates more confusion than clarity. While you could break down processes even more—like splitting “Check vet availability” into steps for accessing the calendar, filtering by specialty, and checking for conflicts—this level of detail rarely helps fix business problems.

Step-by-step process to create a data flow diagram

Creating a data flow diagram might seem daunting, but it’s easier than you might think. By following these simple steps, you’ll be mapping your information systems like a pro in no time.

Step #1: Define the scope  

Before you start drawing, take a moment to decide what you want to map. What are the boundaries of your system? What processes or activities do you want to include? Clearly defining the scope helps you stay focused and avoid getting lost in the details.

Step #2: Create a context level diagram  

Start with the big picture. Draw a single shape representing your entire system and then add shapes around it for the external entities interacting with it. Use arrows to show how the data flows between them.

Don’t forget to label everything clearly. Give your system a descriptive name within the central shape and label each external entity. Also, label each arrow with the type of data that’s flowing, such as “Customer order,” “Payment information,” or “Shipping confirmation.” 

Step #3: Define subprocesses

Break down your main process into smaller pieces. Remember the golden rule: Each process should take information in, do something with it, and send it out.

Take notes on:

• Key tasks: What are your system’s main tasks?
• Inputs and outputs: What information does each task need, and what does it produce?
• Data transformation: How does each step modify or process the information?

Track how the data travels through your system until it completes its journey. If you’re unsure how certain processes work, talk to the people who handle them daily.

Step #4: Build a Level 1 diagram

Now, it’s time to assemble the pieces of your data flow puzzle. Take the subprocesses you defined in Step #3 and map them out visually.

Begin with an external entity that triggers the process, like a customer placing an order. Draw your first process, then follow the data flowing through your system. Add each process in sequence, connecting them with arrows to show how data transfers between them.

Label each data flow so it’s clear what gets transferred at each step. Follow the data’s journey until it reaches its final destination, whether an external entity or a data store.

Step #5: Review and refine your diagram

Share your diagram with key stakeholders who use and manage the system. They might spot things you missed or suggest clearer ways to show how it works. Once you have their input, work together to find ways to improve your processes. Think of it as a map to help you find better routes through your system.

Best practices for data flow diagram success

You already know the basics of data flow diagrams, but here’s how to improve them.

Use a data flow diagram maker

While drawing your diagrams by hand is fine, online software tools like Lucidchart and Miro can make things much easier and faster. These tools usually have templates with drag-and-drop shapes and connectors ready to use. They also make editing and sharing your diagrams easy, so you can quickly update them as your processes change.

Find a data flow diagram example

The internet is full of examples of data flow diagrams. Look for examples in your industry or that map processes similar to yours. They can show you what layouts work well and help you spot important elements you might have missed. Just remember to adapt any example to fit your specific needs rather than copying it exactly.

Stick to standard notation 

Every diagramming style has its own symbols—circles for processes in one method, rectangles in another. Pick a single notation style and use it consistently throughout your diagram. Also, use the same font, text size, and line styles throughout your diagram to maintain a clean and professional look.

Follow left-to-right flow

Arrange your processes to flow from left to right across the page. This natural direction makes it easy for others to follow how data migrates through your system. While you might need to occasionally show data flowing in other directions, try to minimize crisscrossing lines that can make your diagram confusing.

Limit processes per level

Don’t try to show everything in a single diagram. Keep each level to 7-9 processes at most—any more gets messy and hard to understand. Instead, nest complex processes into separate sub-diagrams where you can break them down into clearer, more detailed steps.

Key takeaways

• Visualize your processes: Use data flow diagrams to map how information moves through a system to spot areas for improvement.
• Go beyond flowcharts: Always show how data changes as it moves, not just the steps in a process.  
• Break processes into clear steps: Ensure each process has a clear input, action, and output.
• Keep your diagrams simple: Use standard symbols, a left-to-right flow, and limit the number of processes per level.

Review and refine: Get feedback from key stakeholders to ensure the accuracy of your diagram and find where to improve your processes.