AI, ownership and practical business systems

Use AI to Prepare a Business Cash Flow Review

Organize financial documents, distinguish owner earnings from buyer cash flow and prepare a reproducible acquisition worksheet.

Original website companion resource. Published October 9, 2026. This guide is not an excerpt or a claim about the original book chapters.

Give every number a source

Begin with the seller profit and loss statement, tax returns, bank records, payroll records and capital expenditure history. Identify the entity, reporting period and accounting method on each document. AI can help construct a document inventory and flag mismatched periods. Ask it to identify where a figure appears rather than treating a generated summary as a reconciled financial statement.

Build the bridge to buyer cash

Owner earnings, reported profit and cash available after acquisition debt are different measures. Prepare a bridge from reported earnings to supported adjustments, then subtract replacement management cost, cash taxes where applicable, capital requirements and debt service. Working capital changes need their own treatment. An owner salary add-back may be offset by the cost of hiring someone to perform that owner work.

Work through a simple example

Suppose supported annual earnings are $300,000 before buyer-specific costs. Replacement management costs $90,000, scheduled debt payments are $100,000 and expected capital spending is $30,000. The remainder is $80,000 before cash taxes and working capital changes. This illustration is not a valuation. It shows why a seller earnings figure cannot be treated as the buyer take-home income. Use formulas for arithmetic and AI for organizing questions.

Use a document-grounded prompt

Ask: Build a cash-flow bridge using only the supplied figures. For each adjustment, show the source document, page or row, period, explanation and verification status. Separate owner compensation from replacement labor. List cash taxes, debt service, capital expenditure and working capital as separate categories. Do not fill an unknown category with zero. If sources disagree, show both figures and the reason reconciliation is needed.

Create an operating feedback loop

Compare the model with actual results after acquisition. Record monthly management cost, debt service, capital spending and working capital. AI can summarize changes in the bridge and prepare questions for the management review. Someone still needs to approve the underlying accounting and formulas. A useful review produces a corrected model, an owner for every unresolved input and a clear explanation of the cash available for reinvestment or distribution.

Continue learning

Read the book companion guide and explore the related AI workflows.