Waterfall Chart

February 2, 2011

Waterfall Chart Defined

The waterfall chart is a useful graphing tool used by the financial community, business analyst community or anyone interested in graphically displaying quantitative variances for a single variable. I have also heard the Term “Bridge” used to reference the waterfall chart. The term “Bridge” is often used in the financial community.

Possible variables used in a waterfall chart may include:

  • Sales
  • Hours
  • EBIT
  • Inventory
  • Etc.

Waterfall Chart Creation

The waterfall chart is nothing more than a combined column chart with certain columns hid to help the viewer digest the information. The set-up of the data and understanding how this floating column chart works is a straight forward exercise once you understand the technique. Some of the formulas used in automating this chart are moderately complicated, but the concept is sound. A down-loadable example can be grabbed here for your own use, “Download Waterfall Chart.”

Example Data and Corresponding Chart

In this example I will use sales as our variable, though in this example I would hate to be this sales manager.

Description Amount
Sales Goal $10,000
Lost Sales ($1,000)
New Product $550
Lost Sales Channel ($11,000)
New Sales Channel $6,000
Specials $1,000
Recall ($1,000)
Misc. Adj. ($4,000)
New Big Box Deal $7,000

I developed this example to show how the large swings would appear in the graph. Notice how easy it is to visually view these variable lined up now. The graph provides a richer visualization for the user to discern what happened during the year. Instead of just knowing that you achieved or missed your goal is not enough, you need to look at the granularity to determine what actions you can take now or plan on taking in the future to remedy any shortfalls, and in this case there are a lot.

If you Google Waterfall chart you will find many variations of this chart in excel, some examples may be easier to understand so explore and report back on your findings. Also, a great article on how to use Tableau, (a tool I use regularly), to generate the waterfall chart can be found here “link to Tableau Waterfall Chart.”



2 Responses to “Waterfall Chart”

  1. Stephen McDaniel on February 2nd, 2011 8:26 pm

    Thanks for the reference Paul. Waterfall charts are indeed very popular, if you make them in Tableau they have the added advantage of adding advanced filters to keep only/exclude underlying transactions. Of course, with Tableau dashboards, you can easily add complimentary graphs that show other aspects of the data simultaneously, such as a detailed listing combined with a time series and the waterfall chart.

    Keep up the great strategic planning articles!

    Stephen McDaniel

  2. Jon Peltier on February 5th, 2011 11:29 am

    I’ve written a simple tutorial for making waterfall charts in Excel:

    I’ve also created a commercial utility for doing the same, for people who don’t want to spend a lot of time on their charts:

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