Waterfall charts in Excel - Step-by-Step Guide

Introduction

Waterfall charts help you see how a starting value changes step-by-step to reach a final value. They show increases and decreases clearly, making it easy to understand changes in things like budgets or sales over time.

When you want to show how monthly expenses add up to a total budget.

When you need to explain how sales grew or shrank over several quarters.

When you want to visualize profit changes from revenue and costs.

When you want to break down the impact of different factors on a final number.

When you want to present step-by-step changes in financial reports.

Steps

Step 1: Select

- the range of cells containing your data including categories and values

The data range is highlighted and ready for chart creation

Step 2: Click

- the Insert tab on the Ribbon

The Insert tab options appear

Step 3: Click

- the Waterfall or Stock Chart icon in the Charts group

A dropdown menu shows chart types including Waterfall

Step 4: Select

- Waterfall chart from the dropdown menu

Excel inserts a Waterfall chart based on your selected data

Step 5: Click

- any column in the chart that should be a total (like starting or ending value)

The column is selected

💡 Right-click the column and choose 'Set as Total' to make it a subtotal or total column

Step 6: Use

- Chart Design and Format tabs to customize colors, labels, and styles

The chart updates visually to your preferences

Before vs After

Before

A table with categories like 'Start', 'Sales', 'Returns', 'Expenses', and 'End' with numbers in adjacent cells

After

A Waterfall chart showing columns for each category with increases in green, decreases in red, and totals in blue, visually illustrating how the start value changes to the end value

Settings Reference

Set as Total

📍 Right-click a column in the Waterfall chart

Marks a column as a subtotal or total to anchor the waterfall steps

Default: Unset as Total

Chart Title

📍 Chart Design tab > Chart Elements > Chart Title

Add or edit the chart title to describe the data

Default: Show

Data Labels

📍 Chart Design tab > Add Chart Element > Data Labels

Show values on each column for clarity

Default: None

Chart Colors

📍 Chart Design tab > Change Colors

Change the color scheme of the chart for better visual appeal

Default: Default theme

Common Mistakes

Not setting the starting or ending columns as totals

Excel treats all columns as changes by default, which can misrepresent the actual totals

Right-click the starting and ending columns in the chart and choose 'Set as Total' to anchor the waterfall correctly

Selecting incomplete data range missing category labels

The chart will not show meaningful labels, making it hard to understand the steps

Always include both the category names and their corresponding values when selecting data

Summary

Waterfall charts show step-by-step changes from a start value to an end value.

You create them by selecting data and choosing Waterfall chart from the Insert tab.

Remember to set starting and ending columns as totals for accurate display.

Practice

1. What is the main purpose of a Waterfall chart in Excel?

easy

A. To show how an initial value changes step-by-step to a final value

B. To display data in a pie format

C. To compare values across categories side-by-side

D. To create a 3D visual effect for data

Solution

1. Step 1: Understand Waterfall chart purpose

   Waterfall charts visualize how an initial value changes through a series of positive and negative values to reach a final total.

2. Step 2: Compare with other chart types

   Pie charts show parts of a whole, bar charts compare categories, and 3D effects are visual styles, not purposes.

3. Final Answer:

   To show how an initial value changes step-by-step to a final value -> Option A

4. Quick Check:

   Waterfall charts = step-by-step changes [OK]

Hint: Waterfall = track increases and decreases stepwise [OK]

Common Mistakes:

• Confusing waterfall with pie or bar charts
• Thinking waterfall shows only totals, not changes
• Assuming waterfall charts use formulas directly

2. Which of these is the correct way to prepare data for a Waterfall chart in Excel?

easy

A. Use only positive values for all changes

B. Enter formulas directly into the chart

C. Use text labels only without numbers

D. Include both positive and negative values to show increases and decreases

Solution

1. Step 1: Identify data requirements for Waterfall charts

   Waterfall charts need positive values for increases and negative values for decreases to show step changes clearly.

2. Step 2: Eliminate incorrect options

   Using only positive values hides decreases, text labels alone don't create the chart, and formulas are not entered directly into charts.

3. Final Answer:

   Include both positive and negative values to show increases and decreases -> Option D

4. Quick Check:

   Positive and negative values = correct data setup [OK]

Hint: Use positive & negative numbers for changes [OK]

Common Mistakes:

• Using only positive numbers hides decreases
• Trying to put formulas inside the chart
• Using text without numbers for values

3. Given this data for a Waterfall chart:
Start: 100
Increase: 30
Decrease: -20
Increase: 10
What is the final total shown in the chart?

medium

A. 130

B. 120

C. 140

D. 150

Solution

1. Step 1: Add increases and decreases to start value

   Start with 100, add 30 (increase) = 130, subtract 20 (decrease) = 110, add 10 (increase) = 120.

2. Step 2: Calculate final total

   Final total after all changes is 120.

3. Final Answer:

   120 -> Option B

4. Quick Check:

   100 + 30 - 20 + 10 = 120 [OK]

Hint: Add positive and subtract negative values stepwise [OK]

Common Mistakes:

• Adding negative values instead of subtracting
• Ignoring decreases in calculation
• Mixing up order of operations

4. You created a Waterfall chart but it shows all bars starting from zero instead of connecting. What is the likely cause?

medium

A. Data does not include negative values

B. The data range is not formatted as a table

C. The 'Set as total' option is missing for subtotal rows

D. Chart type selected is not Waterfall

Solution

1. Step 1: Understand Waterfall chart bar connections

   Bars connect when Excel knows which rows are totals or subtotals, set by 'Set as total' option.

2. Step 2: Identify missing 'Set as total' setting

   If subtotal rows are not marked as totals, bars start from zero instead of continuing from previous values.

3. Final Answer:

   The 'Set as total' option is missing for subtotal rows -> Option C

4. Quick Check:

   Missing 'Set as total' = disconnected bars [OK]

Hint: Mark subtotal rows as totals to connect bars [OK]

Common Mistakes:

• Assuming negative values fix bar connections
• Thinking table format affects bar start points
• Choosing wrong chart type without checking data

5. You want to create a Waterfall chart showing monthly sales changes, but some months have zero change. How should you handle zero values to keep the chart clear?

hard

A. Leave zero values as is; Excel will show no bar for those months

B. Remove rows with zero values from the data

C. Replace zero values with small positive numbers

D. Convert zero values to negative numbers

Solution

1. Step 1: Understand zero values in Waterfall charts

   Zero values represent no change, so Excel shows no bar for those points, keeping the chart accurate and clear.

2. Step 2: Avoid altering zero values

   Replacing zeros with small positives or negatives misrepresents data; removing rows loses timeline context.

3. Final Answer:

   Leave zero values as is; Excel will show no bar for those months -> Option A

4. Quick Check:

   Zero values = no bar, keep data accurate [OK]

Hint: Keep zeros; chart shows no bar for no change [OK]

Common Mistakes:

• Changing zeros to small numbers distorts data
• Deleting zero rows breaks timeline
• Using negative numbers for zero changes