All About Waterfall Charts

Waterfall charts, the preferred chart type for many consultants and finance professionals, show the change in a key measure, like revenue or profits, between two time periods. The individual bars in this type of Waterfall chart allow you to see which products, categories, or regions contributed the most to the change.

The Waterfall Chart is also used to compare the impact of different line items on a financial statement, like an income statement or statement of cash flows. For example, you can show revenue as the first bar in a Waterfall chart and then all of the cost categories "waterfall" off of revenue until you end with a net income bar. This Waterfall chart enables you to walk your audience through each step and see the relative impact of each line item. You can reinforce the message about relative impact by adding a data row to this chart to show the percent of revenue for each of the bars.

Waterfall charts can be used as an alternative to a stacked bar chart to show segmentation by categories, products, or regions. The Waterfall allows you to build up to a total value by discussing each bar that contributes to the total and it is particularly useful when you have positive and negative values.

Bar comparison lines are frequently used with Waterfall charts to highlight the change between two bars, typically the beginning and ending bar. Axis breaks are often needed when creating a Waterfall chart to allow you to focus attention on the drivers of change, or individual bars, instead of the beginning and ending values, or total bars.