Here is a screenshot of an automated sugarcane farm I built in the side of my house in Minecraft. I adapted the design of a BUD circuit by Stephen Obrien from his book "Advanced Produce Farms - The Advanced Strategy Guide to Minecraft Second Edition" Que publishing 2015. Works ok except sometimes it leaves sugarcane in the bed that doesn't get washed down the water shoot to the hoppers and chests. I was thinking of putting some dispensers on the bottom row filled with water to see if that helps flush those sometime sugarcane's left behind down the water shoot.
you can, as you thought of, try to minimize the loss through a waterfall directly at the sugar cane.
As an alternative, I would suggest using the following design. (see pictures below) In this farm the sugar cane is also harvested automatically, but does not fall into a waterfall, but directly onto the ground. There the harvest is collected by a Hopper minecart. Due to this method the loss of sugar cane is 0%.