Cash Flow Analysis Checklist

Cash flow analysis on an unlocked period gives moving numbers. Confirm the bookkeeper has run the month-end close, posted all AJEs, and applied the close-date password in QBO/Xero before pulling reports.

Pull the working trial balance, statement of cash flows (indirect method), balance sheet, and P&L for the current period plus the trailing 12 months. Export to Excel for the analysis workpaper — pivot tables die on QBO's native CSV.

Tie the period-end book balance on each operating, payroll, and sweep account to the bank rec. Stale uncleared items over 30 days distort cash position — flag any over $1,000 for client review before continuing.

Compare the prior-period closing cash balance in the new export against last month's signed-off package. If the bookkeeper posted entries to a closed period, the trend analysis breaks — document any restatements before proceeding.

Walk net income through D&A, working-capital changes, and non-cash items to arrive at operating cash flow. Common QBO gotcha: depreciation entries posted as JEs to the wrong account show up as operating drag instead of an add-back.

Compute DSO and compare to trailing 6-month average. A swing of more than 5 days warrants client commentary — typical drivers are slow-paying customers, billing-cycle changes, or unrecognized credit memos sitting in the ledger.

Compute DPO and review the 60+ aging bucket. A stretching DPO can mask a cash crunch — confirm with the client whether they're intentionally extending payables or running short on cash.

For inventory-heavy clients, tie the GL balance to the perpetual or last physical count. Inventory build is a frequent quiet drain on operating cash — surface the inventory-turn change in the commentary.

Tie investing-activity capex to the fixed-asset addition column on the roll-forward schedule. Section 179 / bonus depreciation purchases late in the year often appear in investing without a matching tax-basis schedule update.

Confirm principal repayments and new draws match the lender amortization schedule. Interest expense should hit operating activities; principal hits financing — a common error is booking the full payment to interest expense and overstating operating cash drain.

For S-corp and partnership clients, tie distributions to the basis schedule and confirm pro-rata treatment for S-corps. Distributions in excess of basis create taxable gain — flag for the tax preparer if the running basis is approaching zero.

Chart operating, investing, and financing cash flow by month for the trailing 12. Look for seasonal patterns the client may not have priced into their working-capital plan — Q4 inventory builds, Q1 tax payments, mid-year bonus distributions.

Compare current period to prior period and current YTD to prior YTD. Flag any line item that swings more than 10% or $25K (use the threshold appropriate to the client's size) for written commentary.

If a variance can't be explained by known business activity (a closed deal, a planned capex, a known refund), it's likely a coding error in the GL. Decide whether to send back to the bookkeeper for correction or flag for partner review.

For unexplained material variances, schedule a 15-minute review with the engagement partner before delivering the package. Document the partner's disposition (release, hold, or return-to-bookkeeper) in the workpaper.

Calculate current ratio (CA/CL) and quick ratio ((Cash + AR) / CL). Compare to debt-covenant minimums in the loan agreement if applicable — covenant breaches often surface here before the lender catches them.

Divide unrestricted cash by trailing 3-month average net burn. For clients with seasonality, also compute against trough-month burn. Set the liquidity flag based on the more conservative figure.

For clients flagged Watch or Concern, build a weekly direct-method forecast in Float, Dryrun, or Excel. Layer in known receivables collection timing, payroll dates, tax deposits (941 schedule), and debt service. Send to the client with the package and propose a weekly check-in cadence.

Write a 1-2 page commentary covering: cash position vs. prior period, top 3 variance drivers, A/R and A/P health, liquidity assessment, and forecast highlights. Avoid accounting jargon — owners read this; controllers re-read it.

The engagement partner reviews the package, checks the variance commentary against the workpaper, and signs off before client delivery. Address any review notes before sending.

Upload the final commentary, supporting workpaper, and forecast to the client portal (TaxDome, Liscio, or SmartVault). Email is not a delivery channel for client financials — WISP requires encrypted transmission.

Book a 30-minute review with the owner or in-house controller. Walk them through the commentary, surface the variance drivers, and confirm any action items (collections push, capex deferral, draw on the line of credit).