SOMMEIL CONSULTING AND PSYCHOTHERAPY LTD

Executive Summary

Sommeil Consulting and Psychotherapy Ltd is showing early signs of financial strain with sharply reduced working capital and net assets, despite remaining solvent. Immediate focus on managing short-term liabilities and improving cash flow is essential to prevent liquidity distress. With appropriate action, the company can stabilize and regain financial health.

SOMMEIL CONSULTING AND PSYCHOTHERAPY LTD - Analysis Report

Company Number: 13929577

Analysis Date: 2025-07-20 12:42 UTC

Financial Health Assessment of Sommeil Consulting and Psychotherapy Ltd

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1. Financial Health Score: C

Explanation:
The company shows mixed financial health indicators. While it maintains positive net assets and shareholder funds, recent trends reveal a significant reduction in working capital and net assets, indicating emerging liquidity strain. The financial "vital signs" suggest early "symptoms" of stress that require attention to avoid deeper financial distress.

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2. Key Vital Signs

Metric	2025 (£)	2024 (£)	Interpretation
Fixed Assets	1,874	2,640	Modest long-term asset base with depreciation ongoing
Current Assets	18,015	19,557	Slight decrease; mainly cash
Cash	16,372	19,557	Healthy cash position but declining
Debtors	1,643	0	New receivable balance; manageable
Current Liabilities	17,671	7,799	More than doubled; significant rise in short-term obligations
Net Current Assets (Working Capital)	344	11,758	Drastic drop; near zero working capital is a warning sign
Total Assets Less Current Liabilities	2,218	14,398	Significant drop; reduces financial buffer
Net Assets (Shareholders' Funds)	2,218	14,398	Substantial reduction; equity cushion shrinking
Share Capital	1	1	Minimal; typical for small private company

Interpretation of Vital Signs:

• Healthy cash flow in previous years has weakened — cash reserves declined by about £3,200.
• Current liabilities have surged significantly, mainly driven by accruals and deferred income increasing from £907 to £17,671, which suggests growing short-term obligations or deferred revenue recognition practices.
• Working capital (current assets minus current liabilities) shrank from a comfortable £11,758 to a precarious £344, indicating tight liquidity and limited room to cover short-term debts.
• The sharp decrease in net assets from £14,398 to £2,218 may be due to increased liabilities and/or use of reserves to fund operations.
• The company remains a small private limited entity with a single director and one employee, suggesting limited operational scale.

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3. Diagnosis: Financial Condition Summary

The company is currently active and solvent but exhibiting early signs of financial stress:

• The significant increase in current liabilities, especially accruals and deferred income, acts like a "symptom of distress" in liquidity management. It implies obligations are building up faster than current assets can support.
• The working capital collapse from a healthy £11,758 to only £344 is the most critical symptom—this leaves the company vulnerable to cash flow shocks.
• The declining net assets and shareholder funds indicate that accumulated profits or reserves have been largely consumed, possibly to cover operating costs or increased liabilities.
• No audit was required (small company exemption), and the company’s financials are unaudited, so while figures are accepted at face value, detailed scrutiny is limited.
• The company has one director with full control, which simplifies decision-making but may also concentrate risk.

Overall, the company is in a fragile but stable condition. The financial "pulse" is weak but not yet critical. If current trends continue unchecked, liquidity problems could escalate, risking solvency.

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4. Recommendations

To improve the financial wellness and restore robustness, Sommeil Consulting and Psychotherapy Ltd should consider:

1. Improve Working Capital Management:

   • Closely monitor and manage short-term liabilities, especially accruals and deferred income. Understand the nature of these liabilities and explore options to defer payments or renegotiate terms.
   • Accelerate collection of debtors and optimize cash conversion cycles to boost liquidity.

2. Cash Flow Forecasting and Budget Control:

   • Implement rigorous cash flow forecasting to anticipate liquidity gaps.
   • Control discretionary spending and delay non-essential capital expenditures.

3. Revenue and Profitability Enhancement:

   • Review pricing, service offerings, and client contracts to increase turnover and margins.
   • Explore additional revenue streams in related health activities to diversify income.

4. Consider External Financing if Needed:

   • If working capital remains tight, consider short-term financing options such as overdrafts or invoice financing to smooth cash flow.
   • Evaluate potential for equity injection by the shareholder or new investors to bolster net assets.

5. Governance and Reporting:

   • Maintain timely filings and transparent financial reporting to build stakeholder confidence.
   • Consider voluntary audit or independent review if practical to assure accuracy and credibility.

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Medical Analogy Summary

The company currently has a weak pulse with signs of financial fatigue—cash reserves and equity are dwindling, and liabilities are increasing rapidly. Immediate attention to "hydrating" the cash flow and "restoring electrolyte balance" through working capital management is critical to avoid slipping into a more serious "financial illness" like insolvency.

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