Financial Analysis Agent

A comprehensive financial analysis skill that enables AI agents to produce defensible, CFO-ready financial outputs. Every technique here is grounded in standard accounting practice (US GAAP / IFRS compatible) and designed for agents operating on real financial data.

When to Use

• - Monthly/quarterly financial close cycles
• Variance analysis on budget vs actual results
• Cash flow forecasting and 13-week rolling dashboards
• Generating CFO commentary and board-ready narratives
• Ratio analysis for lending covenants or investor reporting
• AR/AP aging analysis and collections prioritization
• Bank reconciliation pattern matching

When NOT to Use

• - Tax return preparation or tax advisory (use a tax compliance skill)
• Audit opinions or attestation work (requires human CPA sign-off)
• Regulatory filings (SEC, state filings — requires compliance review)
• Valuation work (DCF, comps — requires a valuation-specific skill)
• Payroll processing or HR-related financial work

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1. Variance Analysis Methodology

Variance analysis decomposes the difference between budget and actual into price, volume, and mix components.

Price Variance

Measures the impact of actual price differing from budgeted price, holding volume constant.

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Example:
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Volume Variance

Measures the impact of actual volume differing from budgeted volume, at budgeted price.

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Example:
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Mix Variance

When multiple products exist, mix variance isolates the impact of selling a different proportion than planned.

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Three-Way Reconciliation

Always reconcile: INLINECODE0

If the three don't sum to the total, you have a calculation error. Never present unreconciled variances.

Materiality Thresholds

Metric	Threshold	Action
Revenue line item	>5% or >$10K	Requires written explanation
Expense line item

>10% or >$5K | Requires written explanation | | Net income impact | >2% | Requires CFO commentary | | Balance sheet item | >$25K | Requires reconciliation |

Adjust thresholds based on entity size. A $2M company uses different thresholds than a $200M company.

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2. Cash Flow Forecasting (13-Week Rolling)

The 13-week cash flow forecast is the standard tool for liquidity management. It covers one full quarter on a weekly basis.

Structure

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Collection Assumptions

Build collection curves from historical data:

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Forecast Accuracy Tracking

Every week, compare last week's forecast to actual:

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Red Flags

• - Closing cash below minimum balance requirement in any week
• Three consecutive weeks of declining cash
• Collections falling below 85% of forecast
• Concentration: any single customer >25% of weekly inflows

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3. Month-End Close Checklist

A disciplined 10-step close process. Target: complete within 5 business days of month-end.

The 10 Steps

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Accrual Checklist

Common accruals that get missed:

• - [ ] Payroll accrual (days worked but not yet paid)
• [ ] Bonus accrual (pro-rata for period)
• [ ] Interest accrual on debt
• [ ] Utility accruals
• [ ] Professional services received but not invoiced
• [ ] Insurance amortization
• [ ] Prepaid expense amortization
• [ ] Deferred revenue recognition

Journal Entry Standards

Every journal entry must include:

1. 1. Date
2. Debit account(s) with amount
3. Credit account(s) with amount
4. Description/memo explaining the entry
5. Supporting documentation reference
6. Preparer and approver

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4. CFO Commentary Templates

CFO commentary answers three questions: What changed? Why? What should we do?

Revenue Commentary Template

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Expense Commentary Template

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Cash Position Commentary

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5. Budget vs Actual Analysis

Report Structure

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Waterfall Analysis

For board presentations, decompose the variance into a waterfall:

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6. Ratio Analysis

Liquidity Ratios

Ratio	Formula	Healthy Range	Red Flag
Current Ratio	Current Assets / Current Liabilities	1.5 - 3.0	< 1.0
Quick Ratio

(Cash + Receivables) / Current Liabilities | 1.0 - 2.0 | < 0.5 | | Cash Ratio | Cash / Current Liabilities | 0.5 - 1.0 | < 0.2 | | Working Capital | Current Assets - Current Liabilities | Positive | Negative trend |

Profitability Ratios

Ratio	Formula	Notes
Gross Margin	Gross Profit / Revenue	Compare to industry benchmarks
Operating Margin

Operating Income / Revenue | Exclude one-time items | | Net Margin | Net Income / Revenue | After all charges | | EBITDA Margin | EBITDA / Revenue | Most comparable across companies | | ROE | Net Income / Avg Equity | Should exceed cost of equity | | ROA | Net Income / Avg Assets | Asset efficiency measure |

Leverage Ratios

Ratio	Formula	Covenant Typical	Warning
Debt/Equity	Total Debt / Total Equity	< 2.0x	> 3.0x
Debt/EBITDA

Total Debt / EBITDA | < 3.0x | > 4.0x | | Interest Coverage | EBITDA / Interest Expense | > 3.0x | < 2.0x | | Fixed Charge Coverage | (EBITDA - CapEx) / (Interest + Principal) | > 1.2x | < 1.0x |

Efficiency Ratios

Ratio	Formula	Target
DSO (Days Sales Outstanding)	(AR / Revenue) × Days	< Payment terms
DPO (Days Payable Outstanding)

(AP / COGS) × Days | Match or exceed DSO | | DIO (Days Inventory Outstanding) | (Inventory / COGS) × Days | Industry-specific | | Cash Conversion Cycle | DSO + DIO - DPO | Lower is better |

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7. Aging Analysis

Accounts Receivable Aging

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Collection Priority Matrix

Bucket	Action	Frequency	Escalation
Current	Thank-you / relationship	Monthly	None
1-30 past due

Friendly reminder email | Weekly | None | | 31-60 past due | Phone call + formal letter | 2x/week | AR Manager | | 61-90 past due | Demand letter + payment plan | Daily | Controller | | 90+ past due | Legal review + reserve | Daily | CFO |

Accounts Payable Aging

Mirror the AR structure but optimize for:

• - Early payment discounts (2/10 Net 30 = 36.7% annualized return)
• Cash flow timing (pay on last day of terms, not before)
• Vendor relationship management (strategic vendors get priority)

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8. Bank Reconciliation Patterns

Standard Reconciliation Format

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Stale Items Investigation

Any reconciling item older than 30 days requires investigation:

Age	Item Type	Action
30-60 days	Outstanding check	Contact payee, confirm receipt
60-90 days

Outstanding check | Void and reissue if needed |
| 90+ days | Outstanding check | Void, reverse entry, escheatment review |
| 30+ days | Deposit in transit | Investigate with bank, possible misposting |

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9. Financial Statement Review Checklist

Before releasing any financial statement, verify:

Balance Sheet

• - [ ] Assets = Liabilities + Equity (must balance to the penny)
• [ ] Cash ties to bank reconciliation
• [ ] AR ties to aging report and subledger
• [ ] AP ties to aging report and subledger
• [ ] Fixed assets tie to depreciation schedule
• [ ] Debt balances tie to loan statements
• [ ] Retained earnings = Prior RE + Net Income - Dividends
• [ ] Intercompany balances eliminate to zero

Income Statement

• - [ ] Revenue recognized per ASC 606 / IFRS 15 criteria
• [ ] COGS matches inventory movement
• [ ] Depreciation/amortization matches fixed asset schedule
• [ ] Interest expense matches debt schedule
• [ ] Tax provision is reasonable (effective rate within expected range)
• [ ] No below-the-line items without disclosure
• [ ] Period-over-period comparison is sensible (no sign errors)

Cash Flow Statement

• - [ ] Operating + Investing + Financing = Change in Cash
• [ ] Change in cash ties to balance sheet cash movement
• [ ] Non-cash items properly excluded from operating section
• [ ] CapEx in investing ties to fixed asset additions
• [ ] Debt proceeds/payments tie to balance sheet debt movement
• [ ] Supplemental disclosures (interest paid, taxes paid) are accurate

Analytical Review

• - [ ] Gross margin is within 2pp of prior period (or explained)
• [ ] Revenue growth is consistent with known business activity
• [ ] No expense line items with >25% unexplained variance
• [ ] Ratios (current, quick, leverage) are within covenant requirements
• [ ] Month-over-month trends are logical
• [ ] YTD figures match sum of monthly figures