SBE CONTRACTS LIMITED

Executive Summary

SBE CONTRACTS LIMITED is a newly established electrical installation business exhibiting typical early-stage financial stress, particularly in managing short-term liquidity. While its capital structure is positive, working capital deficits signal the need for improved cash flow and debtor management. With focused actions on operational efficiency and cash control, the company can strengthen its financial health and build a stable foundation for growth.

SBE CONTRACTS LIMITED - Analysis Report

Company Number: NI695727

Analysis Date: 2025-07-29 12:49 UTC

Financial Health Assessment for SBE CONTRACTS LIMITED

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1. Financial Health Score: C

Explanation:
As a newly incorporated company in 2023 operating in electrical installation, SBE CONTRACTS LIMITED shows early-stage financial signs typical for a start-up. The company’s net assets are positive (£12,286), which is a good sign of basic capital adequacy, but it is experiencing a working capital deficit (negative net current assets of £1,451). This indicates some short-term liquidity strain. The overall financial health is moderate, reflecting a company still establishing its operational footing.

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2. Key Vital Signs (Core Financial Metrics)

Metric	Value (£)	Interpretation
Fixed Assets	13,737	Modest investment in property, plant & equipment indicates foundational capacity.
Current Assets	104,412	Healthy level of short-term assets including cash, debtors, and stock.
Cash	22,313	Reasonable cash reserve but needs monitoring given current liabilities.
Debtors	60,599	Significant receivables; collection efficiency will impact cash flow health.
Inventories	21,500	Stock on hand is moderate, appropriate for electrical installation but needs turnover focus.
Current Liabilities	105,863	High short-term obligations exceeding current assets, signaling liquidity pressure.
Net Current Assets	-1,451	Negative working capital suggests the company may struggle to meet short-term debts promptly.
Net Assets	12,286	Positive equity indicating solvency but narrow margin.
Shareholders’ Funds	12,286	Reflects owners’ stake, consistent with net assets.
Employees	2	Small workforce consistent with company size and activity.

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3. Diagnosis: Business Financial Health

• Liquidity (the "pulse" of cash flow): The company shows symptoms of short-term liquidity stress, with current liabilities slightly exceeding current assets. This could be likened to a patient with borderline blood pressure—stable but warranting close monitoring. The cash reserve is reasonable but not robust enough to comfortably cover current debts without relying on debtor collections or inventory sales.

• Capital Structure (the "skeletal frame"): The company’s positive net assets and shareholders’ funds indicate that it is solvent and has a stable capital base, though the margin is thin. This suggests a fragile financial backbone that needs strengthening as the business grows.

• Operational Efficiency (the "muscle tone"): Inventory and receivables levels are significant, implying the company is actively engaged in projects but may face challenges converting stock and receivables into cash quickly. Efficient debtor management and inventory turnover will be critical to avoid cash flow bottlenecks.

• Growth Stage Context: Being a start-up incorporated in 2023, it is natural to experience early-stage financial imbalances. The absence of an income statement limits insight into profitability, but the balance sheet suggests the company is investing in assets and building operations.

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4. Recommendations: Steps to Improve Financial Wellness

• Improve Working Capital Management:

  • Accelerate debtor collections by implementing clear credit terms and proactive follow-ups.
  • Review inventory levels to avoid overstocking and free up cash tied in stock.

• Strengthen Cash Flow Control:

  • Develop detailed cash flow forecasts to anticipate shortfalls and manage payments accordingly.
  • Consider short-term financing options or overdrafts as a buffer for working capital needs.

• Monitor Liabilities:

  • Negotiate extended payment terms with suppliers where possible to ease short-term pressure.
  • Ensure timely payment of taxes and social security to avoid penalties.

• Build Profitability and Reserves:

  • Focus on profitable contracts and cost control to start generating retained earnings for reinvestment.
  • Keep overheads aligned with business volume to maintain lean operations.

• Governance and Reporting:

  • Maintain meticulous accounting records as the company grows to support future audit readiness.
  • Prepare and review management accounts regularly to identify trends early.

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