DESIGN MODE LIMITED

Executive Summary

DESIGN MODE LIMITED is a young, privately controlled company exhibiting positive net assets and working capital, indicating a stable financial base. However, low cash reserves and reliance on director loans suggest cautious cash flow management is essential to avoid liquidity issues. With prudent financial controls and growth planning, the company has a favorable outlook for sustainable development.

DESIGN MODE LIMITED - Analysis Report

Company Number: 14716526

Analysis Date: 2025-07-20 16:49 UTC

Financial Health Assessment of DESIGN MODE LIMITED

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1. Financial Health Score: B-

Explanation:
DESIGN MODE LIMITED is a very young private limited company, incorporated less than two years ago, showing early-stage financial data. The company demonstrates positive net assets and working capital, indicating a generally stable financial base. However, the modest cash reserves and reliance on debt (including director loans) suggest cautious optimism is warranted. The absence of an audit and limited operating history means there is inherent uncertainty. Overall, the company is financially sound for a startup but has room for improving liquidity and strengthening its financial resilience.

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2. Key Vital Signs:

Metric	Value (£)	Interpretation
Net Assets	10,361	Positive net assets indicate the company’s total assets exceed liabilities—a healthy sign.
Net Current Assets	9,308	Positive working capital shows the company can cover short-term obligations with current assets.
Cash on Hand	1,368	Low cash reserves suggest tight liquidity; cash flow management will be critical.
Debtors (Receivables)	19,692	High receivables relative to cash indicate sales on credit; timely collection is important.
Current Liabilities	11,752	Includes VAT, taxes, director loans, and creditors—manageable but needs monitoring.
Director Loans	1,765	Reliance on director loans signals dependence on internal funding.
Profit & Loss Reserve	10,261 (retained earnings)	Early retained profits show initial profitability or capital injections.
Employees	1 (average)	Micro-business scale, typical for startup phase.

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3. Symptoms Analysis and Diagnosis:

• Healthy Cash Flow?
  The company’s cash balance of £1,368 is quite low, which is a "symptom of liquidity tightness." While overall net current assets are positive, cash is the most liquid asset and needs careful management to avoid cash flow distress.

• Receivables and Credit Risk:
  Receivables (£19,692) form the bulk of current assets, indicating the company operates with credit sales. This is normal for a business support and design activity company, but slow collection could lead to cash flow constraints.

• Liabilities Composition:
  Current liabilities of £11,752 include VAT owed (£6,735), taxes, and director loans. The presence of director loans is common in small startups but reflects reliance on internal funding sources rather than external credit.

• Profitability and Reserves:
  The profit and loss reserve of £10,261 suggests the company has either generated profits or received capital injections since incorporation. This is a positive indicator of early business viability.

• Business Scale and Maturity:
  With only one employee and a recent incorporation date (March 2023), the company is in its infancy. Early financial stability is a good sign, but limited history makes long-term prognosis uncertain.

• Accounting and Compliance:
  The company benefits from audit exemptions under the small companies regime, but the absence of an audit means financial scrutiny is less rigorous, which is typical at this stage but should be considered when assessing risk.

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4. Prognosis:

Given the current financial indicators, DESIGN MODE LIMITED is in the early stages of establishing a stable financial footing. The company shows adequate net assets and working capital but must focus on improving cash liquidity and ensuring timely collection of receivables to avoid cash flow issues. The director’s strong control and funding support provide a buffer but also highlight reliance on key personnel.

If the company can scale operations prudently, maintain control over liabilities, and manage cash flow tightly, it has a positive outlook for growth and sustainability. Conversely, failure to convert receivables to cash promptly or escalating liabilities could stress the financial health.

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5. Recommendations:

• Improve Cash Reserves:
  Prioritize accelerating debtor collections to boost cash on hand. Consider offering early payment discounts or stronger credit control policies.

• Monitor and Manage Liabilities:
  Keep close track of VAT and tax obligations to avoid penalties. Evaluate director loans carefully to plan for repayment or formalize funding terms.

• Build Financial Buffers:
  As the business grows, aim to build cash reserves to cover at least 3 months of operating expenses to cushion against unexpected downturns.

• Regular Financial Reviews:
  Implement monthly or quarterly financial reviews to detect early warning signs of distress, focusing on liquidity ratios and cash flow forecasts.

• Plan for Growth:
  Consider strategic investment in marketing or client acquisition aligned with cash flow capabilities to scale sustainably.

• Prepare for Future Audits:
  As the business grows beyond small company thresholds, prepare for statutory audits by strengthening internal controls and accounting practices.

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Medical Analogy Summary:

DESIGN MODE LIMITED’s financial "vital signs" indicate a startup with a stable "heart" (net assets) and adequate "blood flow" (working capital). However, the "oxygen supply" (cash) is low, which could risk "organ stress" (cash flow difficulties) if not managed carefully. With attentive "treatment" (cash management and liability control), the company has good prospects for healthy growth.

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