How to create a Waterfall Chart

What is a Waterfall Chart?

A Waterfall Chart (also called a bridge chart, cascade chart, Waterfall Diagram, or Waterfall Graph) visually shows how an initial value changes through a series of positive and negative adjustments to reach a final total. This type of waterfall plot highlights how gains and losses accumulate or subtract over a sequence, making it ideal for finance, sales, and project reporting.

What a Waterfall Chart Shows

• Sequential changes: Displays how values change over time, such as quarterly sales, expenses, or budget variations.
• Accumulating totals: Demonstrates how each intermediate value contributes to the final outcome, like new customers, cancellations, or upgrades affecting total subscriptions.
• Breakdowns: Decomposes a total into individual components, such as revenue sources, expenses, or profit contributors.

How Waterfall Charts Work

• Start and end points: The first and last bars usually represent the total starting and ending values.
• Intermediate bars: Bars in between show increases (positive values) or decreases (negative values).
• Automatic calculations: The chart calculates the final total based on the cumulative effect of all intermediate changes.

Key Features

• Floating bars: Intermediate bars appear to “float,” connecting the end of one value to the start of the next.
• Color-coding: Increases and decreases are often highlighted with different colors for clarity, though clear labeling can suffice.
• Connectors: Thin horizontal lines may be used to guide the eye through the flow from one bar to the next.

Applications of Waterfall Charts

• Finance: Track profits, losses, and cash flow in waterfall reporting (e.g., showing quarterly profit and loss).
• Sales & Marketing: Analyze growth, cancellations, or changes in customer base (waterfall chart example, e.g., tracking subscriber growth and churn).
• Project Management: Monitor resource allocation and cumulative impacts of project decisions (e.g., visualizing budget allocations across phases).

Advantages and Limitations

Pros

• Simplifies visualization of cumulative changes and part-to-whole analysis.
• Clearly highlights net changes in totals.
• Works with waterfall chart templates for quick setup.

Cons

• Can become cluttered with too many categories.
• May require explanation for audiences unfamiliar with bridge charts or cascade charts.

When to Use a Waterfall Chart

• Ideal for Waterfall Charts in Excel or Google Sheets to show incremental changes.
• Best used when changes are sequential and cumulative, not for highly complex or unrelated data.

Best Practices

• Limit the number of categories to avoid clutter.
• Use consistent color coding to differentiate increases and decreases.
• Highlight starting and ending totals clearly.
• Choose vertical or horizontal Waterfall charts based on space and readability.

Key Takeaways

A waterfall chart or Waterfall Graph helps visualize how individual changes affect a total, making it easier to analyze profits, sales, expenses, or project metrics.

Using bridge charts, cascade charts, or Waterfall diagrams, you can communicate cumulative impacts clearly and efficiently, whether in Excel, Google Sheets, or with a Waterfall chart maker.