ELWELL BUSINESS SERVICES LTD

Executive Summary

Elwell Business Services Ltd shows positive equity growth but is currently facing liquidity challenges indicated by negative working capital and elevated tax liabilities. Improving cash flow management and addressing short-term creditor obligations are crucial to stabilizing financial health and supporting sustainable growth. With focused financial oversight, the company’s outlook can improve from caution to a healthier trajectory.

ELWELL BUSINESS SERVICES LTD - Analysis Report

Company Number: 14250770

Analysis Date: 2025-07-29 20:04 UTC

Financial Health Assessment of ELWELL BUSINESS SERVICES LTD
Assessment Date: Financial year ended 31 July 2024

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1. Financial Health Score: C

Explanation:
The company demonstrates modest financial stability with positive equity growth but exhibits signs of liquidity strain and working capital deficit, which warrants a cautious rating. The score "C" reflects a company that is currently solvent but faces stress in its short-term financial health, requiring attention to cash flow and creditor management.

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2. Key Vital Signs: Critical Metrics and Interpretation

Metric	2024 Value	Interpretation
Current Assets	£3,157	Slightly improved from previous years; includes cash and debtors but remains low overall.
Cash at Bank	£872	Modest cash reserves; increased from £157 in prior year but still limited for operational needs.
Debtors	£2,285	Significant portion of current assets tied up in receivables; risk of delayed cash inflow.
Current Liabilities	£3,427	Increased significantly, mainly taxation and social security liabilities.
Net Current Assets	-£270	Negative working capital ("symptom of distress") indicating short-term obligations exceed assets.
Shareholders’ Funds	£206	Positive equity, increased from £22, showing retained earnings growth and capital injection.
Tangible Assets	£476	Small fixed asset base, declining from previous year, indicating limited investment in long-term assets.
Average Employees	2	Very small workforce consistent with micro/small company status.

Additional Observations:

• The company operates within small company exemption limits, with no audit requirement.
• The increase in tax and social security creditors suggests possible cash flow timing issues or tax payment deferrals.
• Debtors have increased sharply, which may delay cash inflows and pressure liquidity.
• Negative net current assets indicate a liquidity "fever" that needs monitoring to avoid short-term cash crises.

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3. Diagnosis: What the Financial Data Reveals About Business Health

• Liquidity and Working Capital:
  The company shows a working capital deficit (negative net current assets), meaning it does not have enough short-term assets to cover its short-term liabilities. This is a "warning sign" indicating potential cash flow strain. The limited cash balance and high debtor levels exacerbate this issue. The company is currently meeting obligations but must manage cash conversion cycles carefully.

• Profitability and Equity Growth:
  Despite liquidity concerns, shareholders’ funds have improved from £22 to £206, suggesting the company is either generating profits or receiving capital contributions. This is a positive sign akin to a patient gaining strength, but it is a "latent symptom" that liquidity management must support to sustain growth.

• Asset Base and Investment:
  The tangible assets have decreased, implying minimal capital expenditure or asset disposals. This may reflect a conservative approach or limited resources for expansion.

• Operational Scale:
  With only two employees and activity classified under "Other service activities not elsewhere classified," the company is a micro to small service provider. Its financial patterns are typical of small start-ups facing initial growth pains.

• Taxation and Compliance:
  The increase in tax and social security creditors is notable. This may indicate deferred payments or timing gaps, which require careful monitoring to avoid regulatory or penalty risks.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Cash Flow Management:

• Accelerate debtor collections to improve liquidity. Consider stricter credit terms or incentives for early payment.
• Monitor tax liabilities closely and plan payments to avoid build-up of large creditor balances.

2. Strengthen Working Capital:

• Explore short-term financing options (e.g., overdrafts, invoice financing) to cover the working capital gap and smooth cash flow.
• Review and possibly renegotiate payment terms with suppliers to better align cash inflows and outflows.

3. Enhance Financial Planning:

• Prepare detailed cash flow forecasts regularly to anticipate liquidity needs and avoid surprises.
• Track key financial ratios monthly to detect emerging "symptoms" early.

4. Consider Asset Utilization:

• Review fixed asset usage and consider whether investments in assets could improve operational efficiency or if disposals could free up cash.

5. Maintain Regulatory Compliance:

• Ensure timely payment of taxes and social security contributions to avoid penalties and maintain good standing.

6. Monitor Business Growth:

• Evaluate whether current business activities and scale align with financial capacity. Scaling up should be matched with robust financial controls.

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