1ST 4 ACCOUNTS LIMITED
Company number 04912102 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Commercial Credit Assessment: 1ST 4 ACCOUNTS LIMITED
1. Credit Opinion: CONDITIONAL
The company demonstrates consistent profitability and positive net worth, supporting modest credit exposure. However, the declining asset base, high dividend extraction relative to company size, and significant key-person dependency warrant a conditional rather than outright approval. Any facility should be sized appropriately to the company's modest balance sheet and include appropriate covenants.
Rationale: The business has traded for over 20 years and shows retained earnings growth, indicating underlying profitability. However, total assets have contracted from £108,407 (2020) to £54,960 (2025) – a 49% decline – while substantial dividends continue to be extracted. The current ratio of 1.45x is adequate but provides limited headroom for additional obligations.
2. Financial Strength
Balance Sheet Composition (2025): - Net Assets: £20,601 (up from £17,463 in 2024) - Share Capital: £4 (nominal only) - Retained Earnings: £20,597 - Tangible Fixed Assets: £3,591 (fixtures & fittings, NBV)
Equity Trajectory: | Year | Net Assets | Movement | |------|-----------|----------| | 2022 | £8,894 | - | | 2023 | £9,715 | +£821 | | 2024 | £17,463 | +£7,748 | | 2025 | £20,601 | +£3,138 |
The strengthening equity position is positive. However, context is essential: retained earnings increased by only £3,138 in 2025 despite dividends of £35,500 being paid, implying approximately £38,638 profit generated. This means approximately 92% of profits are being distributed, leaving minimal reinvestment in the business.
Leverage: The company has no long-term debt as of 2025 (the £14,853 bank loan from 2024 has been cleared). Short-term borrowings of £5,006 (bank loans/overdraft) represent the only debt facility. This is a low-geared position, which is favourable.
Asset Quality: The asset base is heavily weighted toward current assets (primarily trade debtors at £22,333 and cash at £29,349). Fixed assets are minimal at £3,591 NBV, offering negligible security value for any lender.
3. Cash Flow Assessment
Liquidity Position: - Current Assets: £54,960 - Current Liabilities: £37,950 - Current Ratio: 1.45x - Net Current Assets (Working Capital): £17,010
Cash Position Trend: | Year | Cash | Change | |------|------|--------| | 2020 | £58,905 | - | | 2022 | £46,800 | -20.5% | | 2023 | £38,943 | -16.8% | | 2024 | £27,756 | -28.7% | | 2025 | £29,349 | +5.7% |
Cash has stabilised in 2025 after significant decline. The 2025 cash position of £29,349 provides reasonable coverage of current liabilities but is notably lower than the 2020-2022 period when the business held substantially more liquidity.
Creditor Profile: - Taxation & Social Security: £23,581 (62% of current liabilities) - Other Creditors: £9,249 - Bank Borrowings: £5,006 - Trade Creditors: £114
The minimal trade creditor balance (£114) suggests the company pays suppliers promptly or operates on a cash basis – positive for supplier relationships but indicative of limited trade credit availability.
Debtor Analysis: - Trade Debtors: £22,333 (down from £24,115) - Amounts Recoverable on Contract: £2,500 (down from £10,000)
The decline in "amounts recoverable on contract" from £10,000 to £2,500 may indicate reduced contract work or improved collection. Trade debtors have also reduced, which could signal lower revenue or better credit control.
Dividend Impact: Dividends of £35,500 in 2025 (vs £34,250 in 2024) represent approximately 121% of year-end cash. While the business generated sufficient profits to cover this, the high extraction rate limits internal capital generation for growth or shock absorption.
4. Monitoring Points
| Metric | Current | Watch Threshold | Rationale |
|---|---|---|---|
| Current Ratio | 1.45x | <1.2x | Below this level, short-term obligations become concerning |
| Cash Position | £29,349 | <£20,000 | Critical liquidity floor for a 3-employee business |
| Dividend Extraction | £35,500 | >£40,000 p.a. | Excessive extraction threatens reinvestment capacity |
| Net Assets | £20,601 | <£15,000 | Erosion below this level significantly weakens balance sheet |
| Trade Debtors | £22,333 | >£30,000 | Significant increase may indicate collection problems |
| Taxation Liability | £23,581 | >£28,000 | Growing tax burden could create cash pressure |
Additional Risk Factors: - Key Person Dependency: Single director/owner with >75% control. Incapacity or departure would severely disrupt operations. - Revenue Concentration: As a small bookkeeping practice, loss of key clients could materially impact income. - Industry Risk: Bookkeeping services face disruption from automation and cloud accounting software – long-term revenue sustainability requires adaptation. - Related Party Transactions: Dividends to close family member (£500 annually) are immaterial but should be monitored for changes.
Recommended Covenant Structure (if facility granted): - Minimum net assets of £15,000 - Maximum dividend restriction linked to retained profit coverage - Debt service coverage ratio minimum 1.5x - Negative pledge on tangible assets (though limited value)