ADVANCIS SOFTWARE & SERVICES LTD

Executive Summary

Advancis Software & Services Ltd shows a robust liquidity position and improving equity, indicating good financial health and operational strength. However, high debtor balances and significant related-party debt require active management to maintain financial wellness. With focused controls on receivables and debt, the company is well-positioned for steady growth and sustainability.

ADVANCIS SOFTWARE & SERVICES LTD - Analysis Report

Company Number: 13485115

Analysis Date: 2025-07-19 12:32 UTC

Financial Health Assessment for ADVANCIS SOFTWARE & SERVICES LTD as of 31 December 2023

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1. Financial Health Score: B

Explanation:
Advancis Software & Services Ltd demonstrates a solid financial position with strong liquidity and improving net assets. The company maintains healthy working capital and positive shareholders’ equity. However, the presence of significant long-term liabilities to a related party and some fluctuations in net current assets over time suggest areas for cautious monitoring, preventing a top-grade rating.

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2. Key Vital Signs

Metric	2023 Value	Interpretation
Fixed Assets	£21,941	Modest investment in tangible assets, typical for a software & wholesale company.
Current Assets	£1,000,261	Healthy pool of short-term resources including cash and debtors indicates good operational liquidity.
Cash	£222,771	Positive cash balance supports day-to-day operations and buffers against short-term shocks.
Debtors	£777,490	High receivables suggest reliance on customer payments; must monitor collection efficiency.
Current Liabilities	£429,819	Current debts are manageable given the strong current assets, supporting a positive working capital.
Net Current Assets (Working Capital)	£570,442	Robust working capital, indicating liquidity strength and operational flexibility.
Long-term Liabilities	£455,541	Significant debt owed to a related company; financing structure needs careful management.
Net Assets / Shareholders’ Funds	£136,842	Positive and growing equity base reflecting retained earnings and overall company value.
Share Capital	£5,000	Small base capital typical for a micro/small company; equity growth mainly from retained profits.

Additional Notes:

• The company transitioned from micro-entity to small company reporting under FRS 102 in 2023, improving transparency.
• Average employees increased slightly, indicating some growth and scaling activity.
• Related party debt is material, showing financial support but also potential exposure.

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3. Diagnosis: Financial Vitality and Symptom Analysis

Healthy Cash Flow and Liquidity:
ADVANCIS shows strong liquidity with current assets exceeding current liabilities by over £570k, which is a critical sign of "healthy cash flow." The positive cash balance supports operational needs and short-term obligations. This liquidity "pulse" indicates the company can meet immediate financial demands without distress.

Symptom of Receivables Concentration:
Debtors constitute a substantial portion (~78%) of current assets, indicating that the company's cash flow heavily depends on timely collection from customers. This could be a "symptom of caution"—any delay in payments could strain liquidity.

Long-term Debt Dependency:
The company carries a sizable long-term liability (£455k) owed to a related party (Advancis Software and Services GmbH). While this can be stable financing, it also represents a "chronic condition"—dependency on related-party loans can be risky if not managed prudently, especially if external financing options are limited.

Improving Net Assets:
Net assets grew from £54k in 2022 to £137k in 2023, reflecting profitable operations or capital injections retained in the business. This "strengthening heart muscle" shows the company is building equity and financial resilience.

No Audit Requirement & Small Company Status:
Being classified as a small company with exemption from audit may limit the depth of external validation, which is common but worth noting when considering financial transparency.

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4. Recommendations: Prescriptions for Financial Wellness

1. Enhance Debtor Management:

   • Implement stricter credit control and faster collection processes to reduce debtor days and improve cash conversion cycles.
   • Monitor debtor aging reports regularly to identify and mitigate overdue receivables early.

2. Manage Related Party Debt Carefully:

   • Negotiate clear terms for the related-party loans, including repayment schedules and interest terms, to avoid liquidity shocks.
   • Explore avenues to diversify financing sources over time to reduce concentration risk.

3. Maintain and Grow Working Capital:

   • Continuously monitor working capital ratios to ensure liquidity remains strong as the company grows.
   • Avoid overstocking or excessive capital expenditure that could tie up cash unnecessarily.

4. Financial Reporting and Governance:

   • Although audit exemption applies, consider voluntary external reviews or audits to boost stakeholder confidence and uncover financial risks early.
   • Regularly update financial forecasts and stress test scenarios to prepare for market fluctuations.

5. Strategic Growth Planning:

   • Leverage the strong equity base to invest in growth initiatives prudently.
   • Keep an eye on operational efficiency and cost control to maintain profitability.

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