How to Create a Waterfall Chart in Excel

If you’re looking for a visual representation of how positive and negative values contribute to an overall total, then a waterfall chart might be the right approach for you. In Microsoft Excel, you can easily create a waterfall chart that will help you track the cumulative effect of positive and negative values. It’s an excellent way to illustrate how the different values contribute to the final result, and what impact they have on it.

In this post, we’ll guide you through the steps to create a waterfall chart in Excel. Whether you’re a business analyst, project manager, or just someone looking to improve your Excel skills, we’ve got you covered. With these easy-to-follow steps, you’ll be creating professional-looking waterfall charts in no time.

What is a Waterfall Chart?

A waterfall chart is a visual representation of cumulative effect of positive and negative values. They’re commonly used in business analysis to show how different values contribute to a final result. Waterfall charts are easy to read and provide a concise way to track changes in a given metric over time.

Step-by-Step Guide to Create a Waterfall Chart in Excel

Step 1: Prepare the Data

The first thing you need to do is prepare your data. Your table should include a series of positive and negative values that contribute to an overall total. The first and last columns should be the same. Here’s an example of what the table should look like:

Step 2: Insert a Waterfall Chart

With your data prepared, the next step is to insert a waterfall chart. Start by selecting your data. Go to the “Insert” tab on the ribbon, click on “Waterfall” chart, and then select the type of chart you want to use. Excel will generate a chart based on your data.

Step 3: Customize the Chart

You can customize your chart so it displays the exact information you need. To do this, right-click on the chart and select “Format Chart Area.” From here, you can change colors, font sizes, and other elements to match your preferences.

Step 4: Format the Axis

Formatting the axis is essential to make your chart look professional. Right-click on the horizontal axis, select “Format Axis,” and choose “Categories in reverse order.” This will put the starting and ending points at the top and bottom of the chart.

Step 5: Add Data Labels

Adding data labels makes it easier to understand the chart. You can right-click on any bar in the graph, select “Add Data Labels,” and Excel will automatically add the values to each bar. You can resize and move the labels to fit your preferences.

Final Thoughts

Waterfall charts are an excellent way to visualize changes in metrics over time. Now that you know how to create one in Excel, you can use this knowledge to make more informed decisions in your business or personal projects.

Tips for creating effective Waterfall Charts

While Excel makes it easy to create a waterfall chart, there are some best practices you should follow to make sure your charts are effective. Here are some tips:

• Keep it simple – Use clear and concise labels and avoid cluttering your chart with too much information.
• Stick to one metric – Focus on one metric at a time to avoid confusing your audience.
• Use colors – Color-code positive and negative values in different shades to improve readability.
• Add context – Include contextual information such as goals or benchmarks to give more meaning to your chart.

When to use a Waterfall Chart

Waterfall charts are commonly used in business analysis and financial reporting because they make it easy to track changes over time. Here are some specific situations where you might want to use a waterfall chart:

• Budget tracking – Use a waterfall chart to monitor expenses and revenue over time.
• Profit and loss analysis – A waterfall chart can help you track profits and losses at a glance.
• Sales reporting – Use a waterfall chart to show changes in sales volume, discounts, and returns over a period of time.
• Inventory management – A waterfall chart can help you identify where inventory levels are rising and falling.

Creating a waterfall chart in Excel is an excellent way to track changes in any metric over time. By following the steps outlined in this guide, you can create professional-looking charts that are both easy to read and informative. Remember to stick to best practices for design and use and use your charts to gain meaningful insights into your data.

FAQ

Here are answers to some common questions you might have about creating a waterfall chart in Excel:

Can I create a waterfall chart if I’m using an older version of Excel?

Yes, you can still create waterfall charts in older versions of Excel like Excel 2013 or 2010. The process is similar to the current version, but some of the options might be located in different places.

Do I need to format my data in a specific way to create a waterfall chart?

Yes, your data should be formatted in a specific way to create a waterfall chart successfully. Each category should have both positive and negative values, and you should include a starting and ending point. Follow the steps outlined in this post to prepare your data effectively.

Can I customize the look of my waterfall chart?

Yes, you can customize your chart’s colors, fonts, and other elements to match your preferences. Excel offers several formatting options, such as data labels, chart styles, and shapes, to make your chart look more professional.

Can I perform calculations within a waterfall chart?

No, a waterfall chart is only a visual representation of your data. You cannot perform calculations directly within the chart, but you can link your chart to other cells within your worksheet and perform calculations within those cells.

Can I use a waterfall chart for non-financial data?

Yes, a waterfall chart can be used for any metric that changes over time, regardless of whether it is financial or non-financial. For example, you might use a waterfall chart to track changes in website traffic, employee turnover, or customer satisfaction scores.