Waterfall Chart (also known as Bridge Chart) is a highly effective visual method to present changes, both positive and negative, between a start and an end point. The values of the starting and end points are shown as bar graphs, and the gap or change between the two points is bridged by smaller, color coded bar graphs. The size of each bar graph is directly dependent on its value. Here is a great video tutorial on creating a fully automated waterfall chart in Excel 2013, or earlier.
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Why use a Waterfall Chart?
Well, this is because it is one of the best visual representation of changes, growth or transition from a start point to end point. It clearly shows what items contributed the most to the change from a starting point and an end point. If color coded properly, it also shows, which items have impacted positively and the ones that have impacted negatively.
Be careful though, not to add too many items in the breakdown or bridge because it becomes complicated for the readers to distinguish the key items. The main point of the waterfall chart is to highlight key contributors to growth or change between two points. A good practice is to keep the items between 5 to 7, but certainly try not to let them exceed 10 items.
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