Waterfall Chart in Excel — Free Template & Step-by-Step Guide

A waterfall chart (also called a bridge chart) is the single most powerful tool for explaining why a number changed — whether that’s revenue variance, budget vs actual, headcount movement, or a P&L bridge. This guide walks through both the native Excel waterfall chart (Excel 2016+) and the stacked bar trick that works in every version of Excel, with exact formulas, a sample data table, and formatting tips for polished, presentation-ready output.

Dr Waqas Rafique · Founder & CTO · PhD, Statistical Machine Learning
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What is a waterfall chart?

A waterfall chart is a form of data visualisation that shows how an initial value is incrementally increased or decreased by a series of intermediate values to arrive at a final result. Each bar in the chart “floats” above or below the x-axis based on where the running total stands at that point in the sequence. The result looks like a series of suspended blocks — some rising (increases), some falling (decreases) — which is why it’s also called a bridge chart, a cascade chart, or (informally) a “flying bricks” chart.

The term “bridge chart” is preferred in consulting firms like McKinsey and BCG, where it is used to bridge the gap between two totals: for example, last year’s operating profit and this year’s, with each intermediate bar explaining a driver of the change. The labels “waterfall” and “bridge” are interchangeable — they refer to identical chart structures.

When to use a waterfall chart

Waterfall charts are the right choice whenever you need to explain decomposition or attribution — not just what the final number is, but what drove it. Common scenarios include:

P&L variance analysis: Starting from budgeted profit, show how each revenue line (new business, upsell, churn, price changes) and each cost line (headcount, rent, marketing) contributed to the gap between budget and actual. A single chart replaces a paragraph of narrative.

Budget vs actual bridge: Finance teams use waterfall charts to explain year-end deviations to boards and investors. Instead of a table of numbers, the chart makes the biggest contributors to over- or under-performance immediately visible.

Sales funnel analysis: Waterfall charts can show funnel drop-off — starting from leads, then subtracting each stage’s drop-off (MQL disqualified, not contacted, lost at proposal, lost at negotiation) to arrive at closed-won deals. Unlike a traditional funnel chart, a waterfall shows the absolute count lost at each stage.

Headcount changes: HR reporting frequently uses waterfall charts to show opening headcount, then additions (hires, transfers in), subtractions (terminations, transfers out, redundancies), arriving at closing headcount for the period.

Cash flow waterfall: Treasury reports use waterfall charts to show opening cash, then operating inflows, operating outflows, capex, financing activities, and closing cash balance — making the cash position movement immediately legible.

Revenue breakdown: SaaS companies use waterfall charts for Monthly Recurring Revenue (MRR) movement: starting MRR, new business, expansion (upsell), contraction (downsell), churn, ending MRR. This is sometimes called an MRR waterfall or MRR bridge.

Waterfall chart vs bar chart: which to use?

A standard clustered or stacked bar chart is appropriate when you want to compare totals across categories (e.g. revenue by region). A waterfall chart is appropriate when you want to show how a total is constructed from contributing factors, or how it changed over time due to specific drivers. If your audience needs to understand causation or attribution — why the number is what it is — use a waterfall. If they just need to compare sizes, use a bar chart.

Two methods: native chart type vs stacked bar trick

Excel offers two approaches to building a waterfall chart, and the right one depends on your Excel version:

The six steps below teach the stacked bar method (Method 2), which also works in Excel 2016+. Where the native chart type (Method 1) offers a shortcut, a note is included.

1.Step 1 — Set up your data table

The foundation of a waterfall chart is a well-structured data table. You need at least three columns: a Category column (the row labels), and columns for each type of movement. For the stacked bar method, you will end up with four columns: Category, Base, Increase, and Decrease. Start by entering only the raw values — you’ll calculate the Base column in Step 2.

Here is a worked P&L bridge example (all values in £000s):

A few structural rules to follow:

Start and End rows are totals. They represent absolute values and their bars should sit on the x-axis (base = 0). Label them clearly as Start/End so you remember to treat them differently from the change rows.

Decrease values should be stored as positive numbers. In the stacked bar method, negative values cause the bar to hang below the axis in confusing ways. Store all decreases as positive numbers in a dedicated Decrease column, and let the Base formula handle the direction of movement.

Keep a running total column. Add a helper column that tracks the cumulative total after each row. You will need this to calculate the Base series in Step 2.

2.Step 2 — Calculate the invisible base series

The Base series is the invisible scaffolding that lifts each bar to the correct height. In a stacked column chart, Excel stacks all three series (Base + Increase + Decrease) on top of each other. By making the Base invisible (Step 4), you create the illusion that the Increase and Decrease bars are floating at the right position on the chart.

The formula for the Base depends on the row type:

Start row (e.g. Revenue 2024): Base = 0. The opening total bar sits on the x-axis.

Increase rows: Base = Running total of the previous row. The bar starts where the last row ended and rises by the Increase amount.

Decrease rows: Base = Running total of the previous row minus the Decrease value. The bar starts at the bottom of the drop and rises to where the previous row ended.

End row (e.g. Revenue 2025): Base = 0. The closing total bar also sits on the x-axis.

In Excel formula terms, assuming your Running Total is in column D and your Decrease values are in column C:

Here is the complete Base column for the example above:

Double-check that Base + Increase equals the Running Total for increase rows, and that Base + Decrease also equals the previous Running Total for decrease rows. If those checks pass, your Base series is correct.

3.Step 3 — Insert a stacked column chart

Select your Category column (A) and then hold Ctrl to also select the Base, Increase, and Decrease columns. Make sure you include the header row. Then go to Insert → Charts → Column → Stacked Column.

At this stage the chart will look wrong — the Base series will be visible as a large grey or blue bar at the bottom of each stack, and the chart will not yet look like a waterfall. That is expected. You are looking at the raw stacked structure before the Base is hidden.

After inserting, switch rows/columns if Excel has set up the chart with the wrong orientation. Right-click the chart and choose Select Data → Switch Row/Column until the x-axis shows your category labels.

4.Step 4 — Hide the base series (no fill, no border)

This is the step that transforms the stacked column into a waterfall chart. Click on any bar in the Base series (the lowest section of each stack, usually displayed in the default blue or grey). All Base bars should become selected (look for selection handles on all of them).

Then right-click and choose Format Data Series. In the Format pane:

Fill: Select “No fill”

Border: Select “No line”

The Base series will disappear. The Increase and Decrease bars will now appear to float at exactly the right positions. The chart now looks like a proper waterfall or bridge chart.

If any bars seem to be sitting in the wrong position after hiding the Base, go back and verify your Base calculations from Step 2 — an off-by-one error in the running total is the most common cause.

5.Step 5 — Format increases green and decreases red

Click on any bar in the Increase series. Format Data Series → Fill → Solid fill. Choose a green colour. For a professional look, these options work well:

Repeat for the Decrease series (red) and the Start/End series (grey or your brand colour).

Gap width: Right-click any bar → Format Data Series → Gap Width. Reduce from the default 150% to around 30–50%. Narrower gaps make the bars look bolder and more professional. At 30% the bars are close to touching, which gives a cleaner waterfall look for presentations.

6.Step 6 — Add data labels and final polish

Right-click the Increase series → Add Data Labels. Repeat for the Decrease series and the Start/End series. By default Excel will label each bar with its series value, which is exactly what you want — the Increase label shows the positive change amount, the Decrease label shows the decrease amount, and the Start/End label shows the total.

Label positioning

For Increase bars: set label position to Outside End (above the bar top). For Decrease bars: set label position to Inside Base or Outside End depending on bar height — if the decrease bar is short, Outside End (below the bar bottom) keeps labels readable. For Start/End totals: Outside End (above) is clearest.

Remove chart junk

Waterfall charts communicate best when stripped of unnecessary elements. Remove or minimise:

Gridlines: Delete horizontal gridlines entirely, or reduce opacity to 15–20%. The floating bars provide enough visual reference.

Legend: If your chart has a clear title and axis labels, the legend is redundant. Delete it and free up chart area.

Axis labels: The y-axis values can be removed if all bars are labelled. Keep the x-axis category labels.

Connector lines

In the native Excel waterfall chart, connector lines (thin horizontal lines linking the top of one bar to the base of the next) are enabled by default. To add them in the stacked bar version, go to Insert → Shapes → Line and manually draw a line between each pair of adjacent bars. Use a light grey colour at around 50% transparency. Alternatively, add a thin error-bar series set to zero width with a cap at the exact running total values — a more advanced technique that makes the lines move automatically if you change your data.

Chart title

Always include a descriptive chart title that states what the chart is showing and the time period. Example: “Revenue Bridge: Actual 2024 to Actual 2025 (£000s)”. A chart title that restates the obvious (“Revenue Waterfall Chart”) wastes space — put the insight in the title instead.

Waterfall chart use cases in practice

P&L bridge / variance analysis

The most common waterfall chart in finance and strategy. The Start bar shows the prior period’s EBITDA or operating profit. Each intermediate bar shows a specific driver: volume effect, price effect, mix effect, cost variance by line, one-off items. The End bar shows the current period result. CFOs use this chart to explain budget vs actual to boards in under 60 seconds. The structure forces you to decompose the variance completely — the End bar must equal the Start plus all intermediates, which means every driver must be identified and quantified.

MRR / ARR bridge

SaaS finance teams use waterfall charts to show Monthly Recurring Revenue (MRR) movement: Opening MRR → New Business → Expansion → Reactivation → Contraction → Churn → Closing MRR. This is called an MRR waterfall or MRR bridge. Tracking this monthly reveals whether growth is driven by new acquisition or by expansion of existing accounts — a critical distinction for unit economics.

Cash flow waterfall

Treasury and FP&A teams use cash flow waterfalls to explain the movement of the cash position: Opening Balance → Operating Cash Inflows → Operating Cash Outflows → Capex → Debt Repayment → Tax Payments → Closing Balance. Each bar makes the source of cash generation or consumption explicit, which a traditional cash flow statement in columnar format cannot do as quickly.

Headcount movement

HR and workforce planning teams use waterfall charts quarterly: Opening Headcount → Hires → Promotions In → Terminations → Resignations → Transfers Out → Closing Headcount. Breaking headcount change into its components reveals whether attrition is accelerating, whether hiring is keeping pace, and where in the business the movement is concentrated.