What a waterfall chart shows and why you'd use one

A waterfall chart is a column chart that shows how a starting number changes through a series of increases and decreases to reach an ending number. Each column represents one step — a gain, a loss, or a subtotal. The columns connect visually, so you can see exactly where money (or any quantity) came from and where it went.

You would use a waterfall chart to show profit and loss, budget changes, cash flow, or how revenue breaks down into expenses. For example, a waterfall chart could show starting cash, then add income, subtract payroll, subtract rent, subtract supplies, and end with net profit. A reader can see the final number and trace backward to understand what created it.

Excel does not have a built-in waterfall chart type in older versions, but Excel 2016 and later include one. If you have an older version, you can build the same visual effect using stacked column charts. Both methods take about five to ten minutes once you understand the structure.

Key Takeaways

  • Excel 2016 and later have a waterfall chart type you can insert directly; older versions require a workaround using stacked columns.
  • A waterfall chart needs three columns of data: the category name, the value (positive or negative), and a helper column for positioning.
  • The chart connects each column to the next, so readers see the flow from start to finish without losing track of the total.
  • You can color-code increases, decreases, and subtotals to make the flow even clearer at a glance.

How to insert a waterfall chart in Excel 2016 and later

Open your spreadsheet and arrange your data in three columns. Column A holds the category labels (for example: "Starting Balance", "Sales", "Returns", "Payroll", "Ending Balance"). Column B holds the values — positive numbers for increases, negative numbers for decreases. Column C is optional but helpful: it holds the subtotal at each step, which Excel uses to position the columns correctly.

Select all three columns including headers. Go to the Insert tab at the top of the ribbon. Click Insert Column or Bar Chart (the icon showing columns), then scroll down and select Waterfall. Excel will draw the chart when ready. The first and last columns will be full-height (showing the starting and ending totals), and the middle columns will show only the change, connected by a line.

Right-click the chart and select Edit Data if you need to add or remove rows. You can also double-click the chart to enter edit mode, then adjust colors, labels, and axis ranges using the Chart Design and Format tabs that appear in the ribbon.

Building a waterfall chart in Excel 2013 and earlier using stacked columns

If your version of Excel does not have the waterfall type, you can create the same effect with a stacked column chart and a helper column. Start with the same three-column layout: categories in column A, values in column B. In column C, create a formula that calculates the running total up to that row. For the first data row, the formula is straightforward the value in B. For each row after that, add the previous running total to the current value.

For example, if your data starts in row 2, the formula in C2 is =B2. In C3, write =C2+B3. Copy this formula down for all rows. This column now shows where each column should start on the chart.

Select columns B and C (the values and the running totals). Insert a stacked column chart. The chart will show two series stacked on top of each other. Right-click the bottom series (the running totals) and select Format Data Series. Set the fill to No Fill so it becomes invisible. The top series will now appear to float at the correct height, creating the waterfall effect. Add data labels to show the values clearly.

Formatting your waterfall chart to show increases and decreases clearly

By default, Excel colors all columns the same. You can change this to make increases and decreases visually distinct. Click the chart to select it, then go to the Chart Design tab. Click Change Colors to try different color schemes, or right-click individual columns to set their color manually.

A common approach is to color increases (positive values) one color — often green or blue — and decreases (negative values) another color, often red or orange. The starting and ending totals can be a neutral color like gray. This makes the flow of money or resources when ready obvious without reading numbers.

You can also add data labels to show the exact value of each column. Right-click the columns and select Add Data Labels. Choose whether to show the value, the category name, or both. Labels make the chart useful for presentations and reports where readers need the precise numbers.

Preparing your data so the waterfall chart reads correctly

The order of your rows matters. Start with your opening balance or starting point. List all increases next, then all decreases, then end with your closing balance or final total. This order makes the chart easiest to read from left to right.

Make sure negative values are actually negative numbers in your spreadsheet — not positive numbers with a minus sign in front. Excel needs the actual negative value to draw the column downward. If you have a row labeled "Expenses" with a value of 5000, enter it as -5000, not 5000 with a label saying "minus".

If your data includes subtotals (for example, "Total Operating Costs" that sums several expense rows), you can include those as separate rows in the chart. They will appear as full-height columns, making it clear that you are showing a checkpoint in the flow rather than a single transaction.

Common mistakes and how to fix them

The most common mistake is forgetting to make decreases negative. If you enter all values as positive numbers, the chart will show everything as increases stacked on top of each other, and the visual will be meaningless. Go back to your data and add minus signs to any row that represents a reduction.

Another mistake is including too many rows. A waterfall chart with 15 or 20 categories becomes hard to read because the columns get narrow and labels overlap. If you have many line items, group them into categories first — for example, combine "Payroll", "Benefits", and "Taxes" into a single "Personnel Costs" row. You can always create a second chart showing the breakdown of that category.

If your chart looks flat or the columns are not connecting properly, check that your running total column is correct. The running total should increase or decrease smoothly from row to row. If it jumps unexpectedly, you have a formula error. Click each cell in the running total column and verify the formula is adding the previous total to the current value.

When to use a waterfall chart instead of other chart types

Use a waterfall chart when you want to show how a total is built from components, or how a starting number becomes an ending number through a series of changes. It is ideal for profit-and-loss statements, budget variance analysis, cash flow tracking, and explaining changes in account balances.

Do not use a waterfall chart if you are comparing independent values that do not add up to a total — for that, a regular column chart works better. Do not use it if you have more than about 12 categories, because the visual becomes cluttered. And do not use it if your audience is unfamiliar with the format; a straightforward table or a line chart might communicate faster.

A waterfall chart is most powerful when you are telling a story about change: "We started with this, added that, subtracted this, and ended with that." If your message is "These five things are different sizes," a different chart type will serve you better.

Frequently Asked Questions

Can I make a waterfall chart in Google Sheets?

Google Sheets does not have a built-in waterfall chart type. You can create the stacked column workaround described above, or you can read your data, build the chart in Excel, and paste it back into Sheets as an image. Some users also build waterfall charts using Google Charts (a separate tool), but that requires writing code.

What if I want to show multiple waterfall charts side by side?

Create separate data tables for each chart, each with its own categories and values. Insert a waterfall chart for each table. Position them side by side on your spreadsheet. This works well when comparing the same flow across different time periods or different departments.

How do I update the chart if my data changes?

If you built the chart from a data range, Excel updates it automatically when you change the numbers in that range. If you added the chart to a different sheet, make sure the data range reference includes the sheet name — for example, Sheet1!A1:C10. You can also right-click the chart and select Edit Data to change which cells it reads from.

Can I show percentages instead of dollar amounts?

Yes. Instead of entering dollar amounts in column B, enter the percentage change for each row. The running total column will then show cumulative percentages. Make sure your starting value is 100 percent so the percentages make sense. Label your axis as "Percentage" rather than "Amount" so readers understand what they are seeing.

What if some of my values are zero?

Zero values will appear as no column at all, which is fine — the chart will skip that row visually. If you want to show that a category had no change, you can include it with a value of 0, and it will straightforward not add height to the chart. This is useful for showing that you considered a category but it had no impact.