How can you use waterfall charts for effective data visualization?

1 What are waterfall charts?

Waterfall charts are also known as bridge charts, cascade charts, or flying brick charts. They consist of vertical bars that represent the initial and final values of a variable, and intermediate bars that show the increase or decrease of the variable between each pair of categories. The intermediate bars are usually color-coded to indicate whether the change is positive or negative. The bars are connected by horizontal lines that form a staircase-like shape, hence the name waterfall.

2 Why use waterfall charts?

Waterfall charts are helpful for showing the breakdown of a value into its components, and how each component contributes to the overall change. For example, you can use a waterfall chart to show how your net income changes from one period to another, by displaying the revenue, cost of goods sold, operating expenses, taxes, and other factors. Waterfall charts can also compare the performance of different categories, such as products, regions, or segments, and show how they affect the total value. Waterfall charts can reveal patterns, trends, and outliers in your data, and make it easier to communicate your findings to your audience.

3 How to create waterfall charts?

For creating waterfall charts, you have a variety of options depending on your preferences and needs. Excel and PowerPoint have a built-in feature since 2016, which can be accessed from the Insert tab. Google Sheets requires a third-party add-on, such as Waterfall Chart Creator or Waterfall Chart Builder. Additionally, there are online tools such as Datawrapper, Plotly, or ChartBlocks that you can use to upload your data and customize the chart's appearance and interactivity. Finally, you can download or share the chart online.

4 How to interpret waterfall charts?

Interpreting waterfall charts correctly can provide a lot of information about your data. To get the most out of them, start from the left; the leftmost bar shows the initial value of the variable and the rightmost bar shows the final value, with the difference between them representing the total change of the variable. The intermediate bars show changes between each pair of categories, with their height indicating magnitude and their color indicating direction (green for positive changes and red for negative changes). The horizontal lines connecting the bars display the cumulative effect of the changes. Additionally, waterfall charts can reveal patterns in your data, such as trends, cycles, or seasonality; you can identify outliers such as spikes, dips, or anomalies; and you can see if your revenue or expenses increase or decrease over time or if they vary by month, quarter, or year.

5 How to improve waterfall charts?

Waterfall charts are powerful data visualization tools that can be improved to make them more effective and appealing. To do this, use clear labels on the bars and axes, choose colors that contrast well and match the tone of your message, use annotations to highlight key points or insights, and add interactive features like tooltips, filters, sliders, or buttons to allow users to explore the data. Doing this will make your waterfall charts more attractive, informative, engaging, persuasive, and dynamic.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?