COMPASS BUILDING CONSULTANCY LIMITED

Executive Summary

COMPASS BUILDING CONSULTANCY LIMITED is financially stable with strong liquidity and growing equity, reflected in a Financial Health Score of B. While positive cash flow and working capital provide a solid foundation, increasing trade debtors and current liabilities warrant careful management to sustain operational health. Implementing tighter credit controls and managing liabilities proactively will strengthen financial resilience and support continued growth.

COMPASS BUILDING CONSULTANCY LIMITED - Analysis Report

Company Number: 12906385

Analysis Date: 2025-07-29 14:55 UTC

Financial Health Assessment for COMPASS BUILDING CONSULTANCY LIMITED

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1. Financial Health Score: B

Explanation:
The company demonstrates solid financial footing with positive net assets and improving working capital. However, certain warning signs such as a significant increase in current liabilities and reliance on director loans indicate areas that require monitoring. Overall, the score B reflects a generally healthy but cautiously monitored financial condition.

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2. Key Vital Signs

Metric	2023 Value (£)	Interpretation
Fixed Assets	50,668	Moderate investment in tangible assets; slight decline from prior year suggests some asset disposals.
Current Assets	260,551	Healthy increase, driven mainly by cash and trade debtors, indicating good liquidity and sales growth.
Cash at Bank	125,006	Strong cash position, a vital sign of liquidity and ability to meet short-term obligations.
Trade Debtors	125,545	Significant increase, suggesting growing sales but potential for delayed cash collection.
Current Liabilities	170,322	Substantial increase (doubled since 2022); may signal increased short-term obligations or payables.
Net Current Assets	90,229	Positive and improved working capital, showing liquidity buffer over short-term debts.
Creditors Due After One Year	38,501	Long-term finance lease obligations; reduced from previous year, easing long-term debt pressure.
Net Assets (Shareholders’ Funds)	92,894	More than doubled since 2022, indicating retained earnings growth and strengthening equity base.
Director Loan	20,625	Interest-free loan from director; while supportive, represents off-balance-sheet funding reliance.

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3. Diagnosis: What The Financial Data Reveals

• Healthy Cash Flow and Liquidity:
  The company’s cash reserves have grown significantly to £125k, indicating a robust liquidity position—the "heartbeat" of financial health. This suggests the company can comfortably meet immediate obligations, an essential sign of financial vitality.

• Working Capital Improvement:
  Net current assets have doubled to £90k, reflecting better management of short-term assets and liabilities. This "breathing room" is critical for daily operations and signals operational stability.

• Rising Receivables – Symptom of Cash Collection Lag:
  Trade debtors have surged to £125k, more than doubling from previous years. This may indicate strong sales growth but also hints at potential delays in customer payments, which could strain cash flow if not managed carefully.

• Growing Current Liabilities – A Symptom to Monitor:
  Current liabilities have increased sharply to £170k, doubling from 2022. This rise could be due to increased operational costs or deferred payments. While manageable now, it could signal future liquidity stress if not matched by cash inflows.

• Leverage and Director Loan:
  Long-term finance lease liabilities have decreased, reducing the burden of fixed charges. However, the director’s interest-free loan of £20,625, while supportive, shows some reliance on internal financing, which is a "soft" form of debt.

• Profit Retention and Equity Growth:
  Net assets and shareholders’ funds have more than doubled, indicating that the company is retaining profits and building a stronger equity base. This is akin to a patient's improved immune system, better preparing the company to face financial challenges.

• Going Concern and External Risks:
  The directors acknowledge economic pressures such as inflation and geopolitical issues but maintain confidence in the company’s ability to continue trading. This reflects awareness of external "environmental" stressors but currently no immediate threat to survival.

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4. Recommendations: Path to Improved Financial Wellness

1. Improve Debtor Management:
   Implement stricter credit controls or incentivize faster payments to reduce the trade debtor days. This will improve cash flow and reduce the risk of liquidity "breathing difficulties."

2. Monitor and Manage Current Liabilities:
   Investigate the components of rising current liabilities to ensure they are sustainable. Negotiate better payment terms with suppliers or restructure short-term debts if necessary.

3. Regular Cash Flow Forecasting:
   Maintain detailed rolling cash flow forecasts to anticipate any liquidity crunches, especially given the rise in receivables and liabilities. Think of this as regular vital signs monitoring to catch early symptoms.

4. Reduce Reliance on Director Loans:
   Plan to repay or refinance director loans to formal debt or equity funding to strengthen the company’s financial independence and reduce contingent liabilities.

5. Asset Utilization Review:
   Review fixed assets for efficiency and possible disposals of underutilized equipment to release capital or reduce depreciation expenses.

6. Maintain Profit Retention Strategy:
   Continue building retained earnings to enhance the equity base, serving as a financial "immune system" for the business.

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