Waterfall Chart Excel: The Complete Guide (With Templates)

A waterfall chart shows a running total as values are added or subtracted, with color-coded columns distinguishing positive from negative contributions. Excel added native waterfall chart support in 2016, but the implementation has significant limitations: no stacked segments, limited connector formatting, and no live linking to PowerPoint.

This guide covers how to create waterfall charts in Excel, the limitations of the native approach, manual workarounds for older versions, and when to consider add-ins that save hours of formatting time.

What Is a Waterfall Chart in Excel?#

A waterfall chart shows a running total as values are added or subtracted. The columns are color-coded so you can quickly distinguish positive from negative contributions. The initial and final value columns typically start on the horizontal axis, while intermediate values appear as "floating" bars.

The format became standard in consulting and finance because it solves a specific communication problem: explaining how a starting value changed through multiple positive and negative factors to reach an ending value. Instead of showing a table of numbers, a waterfall chart tells a visual story.

Excel added native waterfall chart support in Excel 2016. Before that, analysts built them manually using stacked column charts with invisible "base" series—a tedious workaround that took 20-30 minutes per chart.

When to Use Waterfall Charts in Excel#

Waterfall charts work best when you need to explain variance between two values. Common use cases include:

Financial Statement Analysis#

How did revenue change from last year to this year? A waterfall chart breaks down contributing factors—volume growth, price increases, currency effects, acquisitions—making the story immediately clear.

Typical applications:

• Income statement walks (Revenue to Net Income)
• EBITDA bridges between periods
• Budget vs. actual variance analysis
• Cash flow reconciliations

Project and Inventory Tracking#

Waterfall charts can visualize sequential changes over time, such as inventory level adjustments or project milestone progress.

Sales Performance Analysis#

Breaking down how individual products, regions, or customer segments contributed to total revenue changes makes sales review meetings more productive.

When NOT to Use Waterfall Charts#

If you're forcing data into a waterfall structure, the chart will confuse more than clarify.

Types of Waterfall Charts#

Consultants typically use three variations, each serving a different analytical purpose.

Type 1: Build-Up Waterfall#

Shows how individual components combine to create a total.

Structure: Component 1 + Component 2 + Component 3 = Total

Use cases:

• Revenue by product line building to total revenue
• Cost categories building to total costs
• Regional sales building to global total

Type 2: Gap/Bridge Waterfall#

Shows the difference between two values—typically prior period vs. current period or budget vs. actual.

Structure: Starting Value ± Positive Drivers ± Negative Drivers = Ending Value

Use cases:

• Year-over-year EBITDA bridges
• Forecast vs. actual variance
• Quarter-over-quarter profit walks

Type 3: Stacked Waterfall#

Each bar contains multiple segments, showing both the total change and its composition. For example, a "Volume" bar might break down into "New Customers" and "Existing Customer Growth."

Important: Excel's native waterfall chart does not support stacking. This requires either manual chart building or specialized add-ins.

How to Create a Waterfall Chart in Excel (Step-by-Step)#

Prerequisites#

• Excel 2016 or later (Microsoft 365, Excel 2019, Excel 2021)
• Data organized with labels in one column and values in an adjacent column
• Positive values for increases, negative values for decreases

Step 1: Prepare Your Data#

Set up your data in two columns:

Key points:

• Use positive numbers for increases (they'll appear as upward bars)
• Use negative numbers for decreases (they'll appear as downward bars)
• Include starting and ending totals in your data

Step 2: Insert the Waterfall Chart#

1. Select your data range (both columns, including headers)
2. Go to Insert > Charts section
3. Click the Waterfall chart icon (looks like a small waterfall chart)
4. Excel inserts a basic waterfall chart

Step 3: Set Totals Correctly#

By default, Excel treats all values as incremental changes. You need to tell Excel which bars are totals (starting and ending values).

1. Click on your starting value bar (2024 Revenue) to select it
2. Right-click and choose Set as Total (or double-click, then check "Set as total" in the Format Data Point pane)
3. Repeat for your ending value bar (2025 Revenue)

The total bars will now anchor to the horizontal axis instead of floating.

Step 4: Format Colors#

Excel defaults to blue for increases and red for decreases. To change colors:

1. Click on the chart legend
2. Select just the Increase element
3. Right-click and access the Fill options
4. Choose your preferred color (green is common for positive values)
5. Repeat for Decrease and Total elements

Pro tip: Many financial presentations use green for positive, red for negative, and gray or blue for totals.

Step 5: Add Data Labels#

1. Click on the chart
2. Click the + button (Chart Elements)
3. Check Data Labels
4. Choose label position (Outside End works well for waterfall charts)

Step 6: Clean Up the Chart#

Remove clutter to improve readability:

1. Delete the legend if colors are self-explanatory
2. Remove gridlines (Chart Elements > uncheck Gridlines)
3. Update the chart title to describe what the chart shows
4. Adjust axis formatting if needed

Waterfall Chart in Excel: Limitations and Workarounds#

Excel's native waterfall chart has significant limitations that become frustrating for frequent users.

Limitation 1: No Stacked Segments#

Problem: You cannot show multiple components within each bar. If you want the "Volume" bar to break down into "New Customers" and "Existing Customer Growth," native Excel can't do it.

Workaround: Build a stacked column chart manually with invisible base series. This takes 20-30 minutes and breaks easily when data changes.

Limitation 2: Limited Connector Formatting#

Problem: The connector lines between bars cannot be formatted. You can't change them to dashed lines, adjust thickness, or modify color.

Workaround: None within native Excel. You'd need to overlay line shapes manually.

Limitation 3: Color Scheme Restrictions#

Problem: If you want increases in green and decreases in red for sales charts, but the opposite for cost charts (where cost reductions are good), applying a color theme affects all charts. Manually changing individual bar colors removes dynamic coloring—bars won't update automatically when data changes sign.

Workaround: Create separate chart templates, but maintaining consistency becomes difficult.

Limitation 4: Cannot Add Other Series#

Problem: You cannot overlay additional data series on a waterfall chart. Want to add a target line or benchmark? Not possible natively.

Workaround: Export the chart as an image and add shapes manually, or use add-ins.

Limitation 5: No Automatic Scaling Across Charts#

Problem: When you have multiple waterfall charts in a presentation, each chart auto-scales independently. A $1M change might look larger on one chart than another because the axes differ.

Workaround: Manually set axis minimum and maximum values on each chart—tedious and error-prone.

Limitation 6: Category Labels Orientation#

Problem: Category labels can only be made horizontal by making the chart extremely wide. For longer category names, this wastes significant slide real estate.

Workaround: Abbreviate category names or accept angled labels.

Creating Waterfall Charts in Older Excel Versions (2013 and Earlier)#

If you're using Excel 2013 or earlier, you'll need to build waterfall charts manually using stacked column charts.

The Manual Method#

1. Create helper columns: Add three columns—Base, Rise, and Fall
2. Calculate Base values: The Base column positions each bar at the correct height (cumulative total before the current value)
3. Separate positive and negative: Rise column contains positive values; Fall column contains negative values
4. Create stacked column chart: Use Base, Rise, and Fall as your data series
5. Make Base invisible: Format the Base series with no fill and no border
6. Delete Base from legend: Remove all traces of the helper series

Sample Data Structure#

This method works but is labor-intensive and fragile. Changing any value requires recalculating the Base column, and formatting adjustments must be redone frequently.

Waterfall Chart Best Practices#

After building hundreds of waterfall charts for consulting engagements, certain patterns consistently improve clarity.

Color Coding Standards#

Consistent color coding allows viewers to understand direction instantly without reading every label.

Ordering Bars by Magnitude#

Don't order bars alphabetically or chronologically if magnitude matters. Instead:

1. Largest positive driver first
2. Smaller positive drivers
3. Smaller negative drivers
4. Largest negative driver last

This creates a visual hierarchy that guides attention to what matters most.

Limiting Categories#

Keep your chart to 7-10 bars maximum. More creates visual noise.

Put detailed breakdowns in an appendix slide. The main chart should tell the story at a glance.

Adding Annotations#

Context accelerates understanding:

• Plus/minus signs next to values reinforce direction
• Percentage labels show relative impact ("–12% vs. PY")
• Callout boxes highlight key drivers ("Largest impact: Price increase +$2.4M")

Don't leave interpretation to the viewer—tell them what matters.

Excel Waterfall Chart vs. Alternative Methods#

When to Use Each Approach#

Use Native Excel when:

• You need a quick, one-off chart
• Basic formatting is acceptable
• You won't need stacked segments
• Budget is zero

Use Manual Stacked Column when:

• You need stacked segments
• You're on Excel 2013 or earlier
• You have time and patience
• The chart won't need frequent updates

Use Add-ins when:

• You build waterfall charts regularly
• Charts need professional formatting
• You need stacked waterfalls, CAGR lines, or annotations
• Time savings justify the cost

For consultants and analysts building multiple waterfall charts per project, add-ins like Deckary or think-cell pay for themselves quickly. A chart that should take 60 seconds shouldn't take 30 minutes.

Waterfall Charts in PowerPoint vs. Excel#

If your ultimate destination is a PowerPoint presentation, you have two approaches:

Build in Excel, Paste to PowerPoint#

1. Create and format the chart in Excel
2. Copy the chart
3. Paste in PowerPoint (linked or embedded)

Pros: Familiar Excel environment, maintains data connection

Cons: Formatting may shift, linked charts can break when files move, limited PowerPoint-specific features

Build Directly in PowerPoint#

PowerPoint 2016+ also includes native waterfall charts, with the same limitations as Excel.

Pros: No file linking issues, formatting stays consistent with slide

Cons: Data entry in small PowerPoint dialog, same limitations as Excel's native waterfall

Use PowerPoint Add-ins#

Add-ins like Deckary create charts directly in PowerPoint while linking to Excel data. When you update Excel, one click refreshes all linked charts.

If you're interested in the PowerPoint side, we wrote a complete guide on waterfall charts in PowerPoint covering best practices and step-by-step instructions.

Common Mistakes to Avoid#

Mistake 1: Not Setting Totals#

Problem: All bars float, including the starting and ending values that should anchor to the baseline.

Fix: Right-click starting and ending value bars and select "Set as Total."

Mistake 2: Inconsistent Color Coding#

Problem: Using green for some positive values and blue for others, or red for both decreases and totals.

Fix: Establish a color code (green positive, red negative, gray totals) and apply consistently.

Mistake 3: Too Many Categories#

Problem: Showing 15+ bars because "the client needs detail."

Fix: Group minor categories. Items representing less than 5% of total change should be bundled into "Other."

Mistake 4: Missing Data Labels#

Problem: Expecting viewers to estimate values from bar heights.

Fix: Add data labels to every bar. Values should be immediately readable.

Mistake 5: Wrong Ordering#

Problem: Bars ordered alphabetically when magnitude matters.

Fix: Order by impact—largest drivers first.

Mistake 6: Ignoring Scale Consistency#

Problem: Multiple waterfall charts in the same presentation with different axis scales.

Fix: Manually set axis minimum and maximum values to match across all related charts.

Downloadable Templates and Resources#

Several sites offer free Excel waterfall chart templates:

• Microsoft Support - Official documentation and examples
• Vertex42 - Templates for horizontal and vertical waterfall charts
• Macabacus Blog - Tutorial with downloadable template

Templates save time on initial setup but still require manual formatting adjustments for each use case.

Summary#

Waterfall charts in Excel are essential for financial analysis and variance explanations. The native chart type (Excel 2016+) works for basic use cases, but serious limitations emerge when you need stacked segments, precise formatting, or efficient workflows across multiple charts.

Key takeaways:

1. Excel 2016+ includes native waterfall charts — Insert > Charts > Waterfall
2. Always set totals correctly — Right-click starting/ending bars and "Set as Total"
3. Native limitations include — No stacked segments, limited connector formatting, no consistent scaling
4. For older Excel versions — Build manually using stacked columns with invisible base series
5. Color coding matters — Green positive, red negative, gray totals
6. Order by magnitude — Largest impacts first for visual hierarchy
7. Limit to 7-10 bars — Group minor categories to reduce noise
8. Consider add-ins for efficiency — Tools like Deckary save significant time on recurring charts

The native Excel waterfall chart is a step forward from the days of manual stacked column workarounds. But for consultants and analysts building these charts regularly, the time investment in learning add-ins or building robust templates pays dividends.