What is a Waterfall Chart and When Should it be Used?

It’s not new that the use of diagrams capable of facilitating the reading of data is essential in the business reality. In this sense, the waterfall chart is one of these tools that simplifies the understanding of various information.

Its use can be adopted, for example, to understand how an initial value is affected by a series of factors or steps over time. It is often used in finance and accounting but can also be useful in other areas, such as project management and sales analysis.

If you want to better understand the functionalities of this type of chart, check out this post in full!

Do you know what a Waterfall Chart is?

Also known as a bridge chart or waterfall chart, the waterfall chart is a visual representation of data. Its main characteristic is that it shows how an initial value can be affected by the cumulative effect of positive and negative sequential values.

In other words, the figure shows a series of data in the form of bars, which clearly represent gains and losses. Thus, it is possible to verify how the initial number has changed due to the events that have occurred.

The chart starts with a bar representing the initial value. Then, each subsequent bar is drawn from the previous bar, showing the impact that each step has on the total value. The bars are drawn upwards to indicate a positive impact and downwards for a negative impact.

In this type of chart, we can observe that the intermediate columns “float,” demonstrating the variation – which rises or falls, hence the association with the term “waterfall” – in a certain period of time.

 

 

Learn how the Waterfall Chart works

To facilitate understanding of how the waterfall chart works, let’s consider an example.

Imagine a company that sells cell phones with several branches in different cities. Adding up the sales from all units, the obtained values are plotted on the chart.

If it is necessary to identify how the numbers of each branch are, the chart can show how each chain of values behaves. Through this “movement,” it is possible to visualize the performance of each unit.

Even products that are eventually returned can be considered in the figure. After all, the waterfall chart shows negative values, which can be read as “returns.”

When should the Waterfall Chart be used?

There are several situations where a waterfall chart can be useful. Here are some examples:

• Sales analysis: A waterfall chart can be used to understand how each product or product line contributes to total sales. The bars can represent the impact of promotions, discounts, and other marketing initiatives.
• Financial analysis: A waterfall chart can help understand how each line of the balance sheet affects the company’s total value. The bars can represent the impact of revenue, expenses, and investments.
• Project management: A waterfall chart can be used to understand how each stage of a project affects the total time and budget. The bars can represent the impact of delays, scope changes, and other variables.

In summary, in any situation where the idea is to represent changes that occur within a time interval or from a particular event, the waterfall chart is very welcome.

How to create a Waterfall Chart?

Regarding the creation, don’t worry because you can create a waterfall chart in Excel. However, the entire process in the program will have to be manual and yes, it will require a bit more work.

Here is a brief summary, without going into too much detail, of some steps that should be applied:

1. Organize the data in tables;
2. Select the values you want;
3. Click on Insert, then on Chart Group and in the Insert Radar, Surface, Actions, Funnel or Waterfall Chart tab;
4. Finally, click on Waterfall.

After that, you will have only the “skeleton” of your chart built.

It is essential now to format it so that the data can be easily read:

1. Click on the chart to select it;
2. Delete the standard “Chart Title” text;
3. Fill in the blank field with the desired title and define the ideal font;
4. Also, delete the field written “Legend”;
5. Right-click on the chart’s vertical axis and choose Format Axis;
6. Next, type zero in the “Minimum” field and press the Enter key. Click on the axis once more and press the Delete key;
7. Now, right-click on one of the columns and choose Format Data Series.

 

Do you think it’s over? Not yet!

From there, you should change everything that makes sense for your presentation. Obviously, it is quite laborious because, as you may have noticed, it’s one step at a time.

Qlik Sense: the easiest way to create charts

Because it demands a little more time and effort, the waterfall chart is often replaced by column charts, for example.

However, the latter presents limitations compared to the former in some situations.

Therefore, if you find yourself in this dilemma and do not want (or cannot) give up the wealth of details in your presentation, there is a much more practical and faster way to obtain a waterfall chart: through Qlik Sense!

Qlik Sense is a program developed to handle data and create complete, personalized, and highly professional charts.

According to your company’s reality, the system can be molded and offer all the necessary resources for the representation you want to elaborate.

Thus, the data visualization becomes agile and clear, as well as the interpretation.

With Qlik Sense, you can create exclusive presentations, charts, tables, and reports with just a few clicks, considering that the layout is intuitive and organized.

Therefore, make the right decision when choosing a tool capable of offering everything your business needs to be optimized.

Count on the support of Cluster and discover all the possibilities of Qlik Sense!