Company Number: 14358087

Analysis Date: 2025-07-29 18:35 UTC

Financial Health Assessment Report for ACTIVE RAINBOW ENTERPRISE CIC

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1. Financial Health Score: Grade C

Explanation:
ACTIVE RAINBOW ENTERPRISE CIC is a newly established community interest company (incorporated September 2022) operating in physical well-being and performing arts. The financial data reflects the first reporting period of 13 months ending September 2023. The company shows a modest cash balance and net current assets, but net liabilities and a small negative net asset position indicate early-stage financial fragility. The absence of profit and loss detail and reliance on directors’ support suggest the company is in a nascent, vulnerable state but with potential to stabilise.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Cash at bank	788	Small cash reserve; limited liquidity buffer but enough to cover short-term liabilities.
Current Assets	788	Entirely cash, no other current assets such as debtors or inventory.
Current Liabilities	312	Small short-term obligations, manageable given cash holdings.
Net Current Assets	476	Positive working capital indicates ability to cover short-term debts.
Accruals & Deferred Income	479	Slightly exceeds net current assets, affecting net asset position.
Net Assets (Total Equity)	-3	Negative net assets indicate liabilities slightly exceed assets; early-stage “financial distress” sign.
Shareholders’ Funds	-3	Reflects accumulated losses or initial setup costs not yet covered by capital.
Employees	3 (average)	Small team, consistent with CIC size and activities.

Additional Notes:

• No fixed assets reported; all assets are current cash.
• Directors have not received remuneration, indicating volunteer leadership or limited resources.
• The company is exempt from audit under small company provisions, typical for a CIC of this size.
• Going concern is dependent on continued director support, a critical lifeline.

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3. Diagnosis

Financial Vital Signs & Symptoms:
ACTIVE RAINBOW ENTERPRISE CIC exhibits signs of an infant business in the incubation phase. The "healthy cash flow" is minimal but present, suggesting ongoing activities but limited income generation or fundraising so far. The presence of positive net current assets is a reassuring "heartbeat," indicating the company can meet its immediate obligations.

However, the slightly negative net asset position and accruals exceeding net current assets reveal "symptoms of financial stress." This is common in start-ups and non-profits where initial costs and operating expenses precede sustainable revenue streams. The lack of reserves or retained earnings indicates no buffer for unexpected expenses or investment in growth.

The company’s mission and community engagement activities show strong "social health," vital for a CIC, but the "financial health" is fragile. The directors’ commitment to ongoing support is the current "life support system" maintaining operations.

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4. Recommendations

To improve financial wellness and strengthen the company’s financial health, consider the following steps:

1. Enhance Revenue Streams:

   • Develop diversified income sources such as membership fees, grants, sponsorships, or paid workshops to increase cash inflows.
   • Explore partnerships with local authorities or charities for funding support.

2. Improve Financial Planning and Reporting:

   • Implement detailed budgeting and cash flow forecasting to anticipate funding needs and manage expenditures prudently.
   • Regularly review financial performance against plans to catch early warning signs.

3. Build Financial Reserves:

   • Aim to accumulate a modest reserve fund to provide a cushion against cash flow fluctuations or unexpected expenses.
   • Even small retained surpluses can improve net asset position and reduce financial vulnerability.

4. Cost Control:

   • Monitor operating expenses rigorously, prioritizing cost-effective delivery of community activities without compromising quality.

5. Stakeholder Engagement for Funding:

   • Leverage community feedback and impact reports to demonstrate value to potential funders and donors, enhancing fundraising success.

6. Governance and Risk Management:

   • Maintain strong director oversight to ensure compliance, ethical management, and prudent financial stewardship.
   • Consider training for directors in financial management to strengthen internal controls.

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