5 Steps to Craft a Waterfall Chart in Excel

In this post, we'll explore the process of creating a waterfall chart in Excel, a powerful visualization tool for demonstrating how an initial value changes over time or through different stages. Waterfall charts are particularly useful for financial analysis, project management, and any scenario where you need to track the cumulative effect of sequentially introduced positive or negative values. Here are the five steps to get you started.

Step 1: Set Up Your Data

The first step to creating a waterfall chart is preparing your data. Ensure your data includes the following:

• Start and End Values: These are the initial and final values of your dataset.
• Intermediary Changes: These are the increases or decreases that occur between the start and end values.

Here’s a simple example:

💡 Note: Make sure your starting value is positive, and your final value is set to achieve a visual connection with the end result.

Step 2: Insert a Stacked Column Chart

With your data ready:

1. Select your data range, including the headers.
2. Go to the “Insert” tab in Excel.
3. Click on “Insert Column or Bar Chart” and choose the “Stacked Column” chart.

This will produce a stacked column chart, but it’s not a waterfall chart yet.

Step 3: Customize for Waterfall Effect

To turn this into a waterfall chart:

1. Modify the chart series:
   • Right-click the chart and select “Select Data”.
   • Add a new series named “Base” or “Connectors” with the values set to zero except for the end point, which should be the cumulative sum.
2. Format the “Decrease” values: Change their color to negative or red to visually distinguish them from increases.
3. Adjust the “Base” series: Set no fill color to give the floating effect typical in waterfall charts.

Step 4: Fine-Tuning the Chart

Now fine-tune your chart to perfection:

• Adjust axis labels, titles, and legends for clarity.
• Remove the fill color of the base series for the visual effect.
• Set up data labels to show the value of each bar.

Ensure your chart looks professional and clearly communicates the data points.

Step 5: Analyze and Present

With your waterfall chart created:

• Analyze: Review the chart for any inconsistencies or errors, making sure it tells the correct story of your data.
• Present: Use this chart in presentations, reports, or dashboards to explain the progression of changes to your audience.

Waterfall charts can highlight trends, performance, or changes in financial statements with ease.

In summary, creating a waterfall chart in Excel is a matter of setting up your data, choosing the right chart type, and then customizing it to visually represent the sequential nature of your data changes. This method allows for clear communication of how initial values evolve through different stages to a final outcome. Understanding these steps will equip you to make the most out of your financial and analytical presentations, enabling better decision-making and analysis.