How To Create A Stacked Waterfall Chart In Excel?

Summary: Demystify complex financial data with stacked waterfall charts. This guide walks you through creating them in Excel, highlighting their benefits and real-world applications. Gain clarity, identify key drivers, and boost communication with this powerful visualization tool.

Have you ever struggled to explain how you arrived at a final number, especially when that number involves a series of ups and downs? Enter the stacked waterfall chart, a visual hero for complex financial data.

This unique chart type goes beyond simply showing the final outcome. It acts like a storyteller, unfolding the journey of a value by showcasing the impact of various positive and negative factors along the way. But what exactly is a stacked waterfall chart, and why should you care?

In this blog post, we'll be diving deep into the world of stacked waterfall charts. We'll explore how they work, why they're so significant for data analysis, and uncover the real-world applications where these charts can truly shine.

What Is A Stacked Waterfall Chart?

A stacked waterfall chart is a visual tool that showcases the cumulative effect of various positive and negative contributors to a final value.

Significance Of Stacked Waterfall Charts

Stacked waterfall charts hold a special place in the world of data visualization for several reasons:

Clarity And Transparency

They break down complex financial data into easily digestible segments. By visualizing the impact of individual factors, they provide a clear picture of how a final number is reached. This transparency fosters better understanding and facilitates discussions around the data.

Identifying Key Drivers

The stacked format allows you to see not only the final outcome but also which factors contribute the most to the overall picture. This helps identify areas where adjustments can be made to maximize positive influences or minimize negative ones.

Improved Communication

A well-designed stacked waterfall chart can be a powerful communication tool. By presenting the data in a visually compelling way, it allows you to effectively communicate complex financial concepts to a wider audience, even those without a strong financial background.

Comparative Analysis

Stacked waterfall charts can be used to compare the performance of different categories or periods. This allows you to identify trends and patterns, leading to better decision-making.

Overall, stacked waterfall charts offer a significant advantage when it comes to analyzing and presenting financial data. They provide clarity, highlight key drivers, improve communication, and even facilitate comparisons, making them a valuable tool for anyone dealing with complex financial information. Here's a step-by-step guide with an example to create one in Excel:

Example:

Imagine you're analyzing sales figures. You want to see how different factors like revenue, returns, and discounts impact your final profit.

Step 1: Data Selection: Highlight the entire data table, including headers.

Step 2: Insert Chart: Go to the Insert tab and click the Insert Column or Bar Chart icon. Choose Stacked Column from the dropdown menu.

Step 3: Chart Creation: Go to chart, and click on it. A pop-up window appears on the right side of the screen. Scroll down to the Other section and select waterfall chart. Post selection, a waterfall chart will appear.

Section 2: Formatting the Waterfall

Hide Start Value: Right-click the Start Value data series (usually the first stacked bar) and select Format Data Series. Under the Series Options tab, set Overlap to 100%. This hides the starting point in the waterfall effect.

Gap Width Adjustment: Right-click anywhere on the chart and select Change Chart Type. Choose Stacked Column again. In the Format Chart Area pane, under Series Options for each stacked segment (Revenue, Returns, Discounts), adjust the Gap Width to a small value (e.g., 15%) to create a smoother flow.

Data Labels: Right-click on a data point in each stacked segment and select Add Data Labels. This displays the specific value for each contributor.

Customization:

You can format the chart elements (axis labels, colours, legend) using the Chart Tools options on the ribbon.

Tips:

Use clear and concise labels for your chart elements.
Choose colours that effectively differentiate between positive and negative contributions.

By following these steps and customizing the chart elements, you can create an informative stacked waterfall chart in Excel to visually represent the cumulative impact of various factors on your data.

Conclusion

Stacked waterfall charts are a powerful tool for bringing transparency and understanding to your financial data. By following the steps outlined in this blog, you can now leverage Excel's capabilities to create these informative charts yourself.

Remember, effective formatting and clear labelling are crucial for maximizing the impact of your visualization. So, the next time you need to communicate the journey behind a number, ditch the static bar chart and unleash the power of the stacked waterfall!

Frequently Asked Questions

What Is The Difference Between A Regular And Stacked Waterfall Chart?

Regular waterfalls show changes, but stacked waterfalls add another layer. They break down those changes into positive and negative contributors, allowing you to see what's driving the overall trend.

When Should I Use A Stacked Waterfall Chart?

These charts are perfect for explaining how you reached a final number, especially when influenced by several factors (like revenue and expenses). They're great for budgets, variance analysis, and contribution margins.

Are Stacked Waterfall Charts Hard To Make?

While the concept is simple, creating them can be tricky in some spreadsheet programs. There are workarounds, or you can use data visualization tools that offer them as a built-in option.