What is a Waterfall Chart in Power BI?

A waterfall chart is one of the most effective ways to tell a story about how a starting value changes over time. Instead of just showing the beginning and the end, it walks you through each step - every addition and every subtraction - to reveal the complete picture. This article will explain what a waterfall chart is, why it's so useful in a business context, and provide a step-by-step guide to creating one in Microsoft Power BI.

What Exactly Is a Waterfall Chart?

Think of explaining your monthly budget to a friend. You wouldn’t just say, "I started with $2,000 and ended with $500." You’d tell the story: "I started with my $2,000 salary, then paid $1,200 for rent, spent $400 on groceries, and then made an extra $100 from a side gig, which left me with $500."

That story is exactly what a waterfall chart does visually. The chart shows a running total as values are added or subtracted. It typically consists of:

• The Starting Bar: The full column on the far left that represents the initial value (e.g., starting revenue, initial budget, opening headcount).
• The Floating "Change" Bars: These bars hang in the middle. They show the positive and negative changes that occur sequentially. By convention, increases (gains, revenue) are shown in green or blue, while decreases (costs, losses) are shown in red.
• The Ending Bar: The full column on the far right that represents the final value after all the positive and negative changes have been applied.

Each floating bar begins where the last one ended, creating a cascading or "waterfall" effect. This makes it incredibly easy to see the individual impact of each category on the total. You can pinpoint exactly which factors had the biggest positive or negative effect at a glance.

When Should You Use a Waterfall Chart?

Waterfall charts are all about illustrating change and are an essential tool for data-driven storytelling. They are particularly effective when you need to explain the "why" behind a final number.

Common Use Cases for Waterfall Charts:

• Financial Statement Analysis: This is the classic example. You can visualize a Profit and Loss (P&L) statement by starting with total revenue, subtracting the cost of goods sold (COGS), operating expenses, marketing spend, and taxes to finally arrive at your net profit. It tells a clear story of company profitability.
• Tracking Sales Performance vs. Target: Start with your quarterly sales target. Then, show the actual sales contributed by each region or product line. Finally, show the ending bar representing the surplus or deficit relative to your goal.
• Visualizing Inventory Changes: Start with the beginning-of-month inventory count. Show additions from new stock deliveries as increases and show sold items or spoilage as decreases to arrive at the end-of-month inventory level.
• Understanding Website Traffic Changes: Start with last month’s traffic. Then, add gains from new marketing campaigns (e.g., "Organic Search Lift," "Paid Social Campaign") and show drops from other channels ("Decline in Direct Traffic") to see how you arrived at this month's total traffic.
• Analyzing Employee Headcount: Companies use waterfall charts to track changes in their workforce. Start with the headcount at the beginning of the year, add new hires as a positive value, subtract employee departures (both voluntary and involuntary) as negative values, and end with the current total headcount.

Creating Your First Waterfall Chart in Power BI: A Step-by-Step Guide

Building a waterfall chart in Power BI is straightforward. The native visual is quite powerful and requires just a little bit of setup. Let's walk through it using a simple P&L example data.

Imagine you have this simple dataset in Power BI:

Step 1: Get Your Data Ready

Before you build, format your data correctly. You need at least two columns:

• A category column that lists the different items or stages (e.g., 'Gross Revenue', 'COGS', 'Marketing Spend').
• A numeric value column that contains the numbers for each category.

Crucially, make sure your decreases are represented as negative numbers, as shown in the example above. If your 'COGS' value is 60,000 instead of -60,000, Power BI will add it to the total instead of subtracting it, which will throw off your entire chart.

Step 2: Add the Waterfall Chart to Your Report Canvas

Once your data is loaded into Power BI, look over to the Visualizations pane on the right-hand side. Find the waterfall chart icon — it looks like a series of floating bars — and click on it to add it to your report canvas. A blank placeholder for the chart will appear.

Step 3: Configure the Chart Fields

With the blank chart selected, you'll see a few "wells" in the Visualizations pane that you need to populate. Here's what they mean and where to drag your data:

• Category: Drag your category column ('Financial Item' in our example) into this well. This tells Power BI how to label each bar along the horizontal axis.
• Y-Axis: Drag your numeric values column ('Amount' in our example) here. This determines the size and direction (up or down) of each bar.

As soon as you do this, Power BI will generate the waterfall chart. It will automatically detect the positive and negative values and color-code them. It will also calculate and add a final "Total" bar on the right, showing the net result of all the changes (in our example, this would be the net profit).

Step 4: Use the 'Breakdown' Field for Deeper Insights (Optional)

Power BI’s waterfall chart includes a very useful field called Breakdown. This allows you to break down a single P&L item into its component parts. For example, if you wanted to see how your 'Marketing Spend' of $25,000 was allocated, you could add a 'Sub-Category' column to your data.

Let's say our Marketing Spend was split between 'Google Ads', 'Facebook Ads', and 'SEO Content'. You could drag that 'Sub-Category' field into the Breakdown well. Now, when you look at the chart, the 'Marketing Spend' bar will be subdivided into different colors showing the proportion of each sub-category. This feature adds a huge amount of analytical depth without needing to create a separate chart.

Step 5: Format Your Chart for Clarity and Impact

The default chart works, but a little formatting can make it much easier to read and present. Select the chart, and then click the "Format your visual" icon (the paintbrush).

Here are a few common formatting adjustments:

• Colors: Under the "Columns" section, you can change the default colors. While the classic Green-for-Increase and Red-for-Decrease is standard, you can adjust them to fit your company's branding. You can also set a distinct color for the "Total" bar to make it stand out.
• Data Labels: Turn these on ('On') to display the exact value of each bar directly on the chart. This saves your audience from having to guess or refer to the Y-axis for every single change.
• Connector Lines: These are the dashed lines that connect the end of one bar to the start of the next. You can toggle them on or off or change their style under the "Sentiment colors". Keeping them on typically improves readability.
• Title: Always give your chart a clear, descriptive title like "Q3 2023 Profit and Loss Breakdown".

Tips for Better Waterfall Charts

• Keep Your Categories Limited: A waterfall chart with 20 different small bars becomes cluttered and defeats the purpose of being a simple visual story. If you have many small items, consider grouping them into a single "Other Expenses" category to keep your chart clean and focused on the major drivers.
• Leverage the Total Bar: Power BI automatically creates the final total. This is fantastic. You don't need a row in your data labeled "Net Profit" with a calculated number. Let the visual do the math for you. If a category bar doesn't start from where the previous one left, it’s because it has been designated as a total.
• Always Lead with the Context: Tell your audience what they are seeing first. For instance: "This chart walks us through our quarterly revenue of $250,000, showing every major cost, and how we arrived at our profit of $108,000." Start with the big picture before diving into the details.

Final Thoughts

Waterfall charts are an incredibly powerful tool for showing how individual positive and negative values contribute to a final result. By visualizing the story of change sequentially, you provide far more context and insight than a simple table or pie chart ever could. Once you get the hang of them in Power BI, you’ll find yourself using them to explain company performance, budget adherence, and project outcomes.

While Power BI is a great tool, preparing data and configuring visuals can still consume valuable time, especially when you manage dozens of reports. At Graphed (target="_blank" rel="noopener"), we’ve created a way to get these insights without the manual build process. You just connect your data platforms (like Quickbooks, Shopify, or Google Analytics) and ask a question in plain English. For example, "Show me a waterfall chart breaking down our P&L from last month." Our platform generates the same beautiful, live dashboard in seconds, letting your entire team explore data without needing to become a Power BI expert.