PASTEL AND SMUDGE CIC

Executive Summary

PASTEL AND SMUDGE CIC shows stable yet very modest financial health typical of a micro-community interest company. The company is profitable, mainly due to non-operating income, but has minimal cash reserves and net assets, indicating a fragile liquidity position. Strengthening cash reserves and diversifying income will enhance future financial resilience and support sustainable growth.

PASTEL AND SMUDGE CIC - Analysis Report

Company Number: 12684853

Analysis Date: 2025-07-20 15:07 UTC

Financial Health Assessment Report for PASTEL AND SMUDGE CIC

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1. Financial Health Score: C

Explanation:
The company demonstrates a stable but very modest financial position typical of a micro-entity operating in the early years. While it shows profitability and positive net assets, the scale of operations and cash holdings are minimal. This reflects a "stable but fragile" financial health profile.

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2. Key Vital Signs

Vital Sign	Latest Data (FY 2023)	Interpretation
Turnover	£21,000	Small but increasing turnover suggests gradual growth in revenue streams.
Profit before tax	£42,290	Significant profit relative to turnover, boosted by other operating income (£22,000). Indicates non-operating income or grants.
Net Assets / Shareholders' Funds	£55	Positive but extremely low net asset base, indicating very limited capital buffer.
Cash at Bank	£55	Very low cash reserves; could be a liquidity concern in case of unexpected expenses.
Current Liabilities	£0	No short-term debts, indicating no immediate liquidity pressure.
Employees	0	No employees, suggesting minimal operational overhead or reliance on volunteers/contractors.
Profit Margin (PBT/Turnover)	~201% (42,290/21,000)	Unusually high margin due to other operating income; core business profitability should be interpreted with caution.

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3. Diagnosis: Financial Health Analysis

PASTEL AND SMUDGE CIC presents with the symptoms of a typical micro-social enterprise in early stage development:

• Healthy cash flow symptoms: The company reports a sizeable profit before tax, driven largely by other operating income (likely grants or donations), which supports its mission-driven activities such as affordable education and arts awards for youth.
• Symptoms of limited operating scale: Turnover remains low (£21k), with no fixed assets and minimal cash on hand, reflecting an operation with little capital investment or working capital needs.
• Fragile liquidity: Despite no current liabilities, the negligible cash balance (£55) is a symptom of limited liquidity buffer, which could be risky if any unplanned expenses arise.
• Capital structure: Net assets and shareholders’ funds are positive but minimal (£55), indicating the company primarily operates on a not-for-profit or low-margin basis, typical of a community interest company.
• No employees: The absence of employees suggests reliance on voluntary effort or contractors, which may limit scalability but also keeps costs low.
• Governance: The director is also the sole person with significant control, which is common in small entities but may present challenges in governance separation.

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4. Recommendations: Improving Financial Wellness

To enhance the financial health and sustainability of PASTEL AND SMUDGE CIC, consider the following steps:

• Build liquidity reserves: Aim to increase cash balances to cover at least 3 months of operating costs to create a financial safety net against unexpected expenses.
• Diversify income streams: While grants/donations are beneficial, developing steady earned income through classes or services will reduce dependency on volatile funding sources.
• Implement financial controls: Even with a sole director, establish basic financial policies to monitor cash flow closely and plan budgeting to avoid liquidity stress.
• Plan for growth cautiously: Evaluate opportunities for modest investment in fixed assets or marketing to increase turnover while maintaining low overhead.
• Explore partnerships: Collaborate with other education or arts organisations to share resources and reduce costs.
• Regular financial review: Conduct quarterly reviews of financials to detect early warning signs of distress, akin to monitoring vital signs in health.

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