DATALEC BUSBAR INSTALLATIONS LIMITED

Executive Summary

DATALEC BUSBAR INSTALLATIONS LIMITED demonstrates solid financial health with improving net assets and positive working capital, reflecting profitable operations and sound balance sheet management. However, the sharp decline in cash reserves signals a liquidity concern that requires focused attention on debtor collection and cash flow management. By addressing these areas, the company can sustain its growth trajectory and maintain robust financial wellness.

DATALEC BUSBAR INSTALLATIONS LIMITED - Analysis Report

Company Number: 12489135

Analysis Date: 2025-07-20 12:14 UTC

Financial Health Assessment: DATALEC BUSBAR INSTALLATIONS LIMITED

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1. Financial Health Score: B

Rationale:
DATALEC BUSBAR INSTALLATIONS LIMITED exhibits solid financial stability with improving net assets and positive working capital over recent years. The company’s financial "vital signs" indicate a generally healthy balance sheet and controlled liabilities. However, a notable symptom of cash flow weakness—significant decline in cash reserves—raises caution. This results in a grade B, reflecting good financial health but with areas requiring attention to ensure continued wellness.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	493,304	423,842	Increasing current assets is a positive sign, reflecting more resources available to cover short-term obligations.
Cash and Cash Equivalents	13,442	93,841	Sharp decline—symptom of potential liquidity stress despite strong receivables. Needs monitoring.
Debtors	479,862	330,001	Rising debtors suggest growing sales/business or slower collections; must ensure timely cash inflows.
Current Liabilities	360,913	327,246	Moderate increase but manageable relative to assets; creditors primarily short-term obligations.
Net Current Assets (Working Capital)	132,391	96,596	Healthy positive working capital indicates the company can meet short-term debts comfortably.
Net Assets / Shareholders' Funds	132,391	96,596	Reflects accumulated profits and equity growth, a sign of improving financial strength.
Share Capital	2	2	Minimal share capital typical for a small private limited company; strength lies in retained earnings.

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3. Diagnosis: What the Financial Data Reveals

• Healthy Balance Sheet: The company shows a robust increase in net assets from £96.6k to £132.4k, indicating profitable operations and retained earnings growth. The positive working capital "pulse" confirms the company can cover its current debts without distress.

• Liquidity Symptom - Low Cash Reserves: The drastic drop in cash from £93.8k to £13.4k is a symptom of potential liquidity tightness. While current assets are sufficient, the bulk being tied up in debtors (£480k) could mean slower cash collection or extended credit terms. This is a critical area to monitor to avoid "cash flow fainting spells."

• Receivables Management: The high level of debtors relative to cash signals the company might be extending credit generously or facing delays in payment from customers. This can strain day-to-day operations if not managed actively.

• Stable Creditors and Tax Obligations: Current liabilities increased moderately but remain covered by net current assets. Tax liabilities have grown, consistent with increased profits, indicating the company is meeting tax responsibilities.

• Small Scale and Structure: With only two employees including directors, and minimal share capital, the company is in the micro/small category under UK definitions. This size limits exposure but also highlights dependency on effective cash and debtor management.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Cash Flow Management:

   • Accelerate debtor collections through stricter credit control policies, offering early payment discounts or enforcing payment terms.
   • Review invoicing processes to ensure timely and accurate billing.

2. Monitor and Manage Debtors:

   • Regularly analyze aged receivables and follow up on overdue accounts to reduce the risk of bad debts.
   • Consider credit insurance or factoring if debtor collections remain slow.

3. Maintain Adequate Cash Reserves:

   • Build a cash buffer to cover at least 3 months of operating expenses to avoid liquidity "fainting spells."
   • Possibly negotiate credit terms with suppliers to improve cash flow timing.

4. Plan for Tax Liabilities:

   • Ensure tax payments are planned and provisioned to avoid surprises impacting cash.

5. Strategic Growth with Caution:

   • While the company is growing (seen in increased assets and profits), growth should be managed alongside cash flow to prevent overextension.

6. Regular Financial Health Checkups:

   • Conduct quarterly financial reviews focusing on cash flow, debtor days, and working capital health.

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Medical Analogy Summary

DATALEC BUSBAR INSTALLATIONS LIMITED’s financial health is like a patient with strong vital signs—solid equity and working capital—indicating good overall health. However, the "symptom" of low cash reserves is akin to dehydration: the body (business) has resources but struggles to access them quickly. Addressing this liquidity symptom through improved cash flow management will help the company maintain its strength and prevent financial distress.

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