SOUTHERN SOFTFLOW LIMITED

Executive Summary

Southern Softflow Limited maintains a stable net asset base but faces liquidity challenges evidenced by consistently negative net current assets. The company’s financial health is moderate, with solvency intact but cash flow management requiring urgent attention to prevent distress. Proactive working capital improvements and enhanced cash flow controls are recommended to secure financial wellness and support sustainable growth.

SOUTHERN SOFTFLOW LIMITED - Analysis Report

Company Number: 13120307

Analysis Date: 2025-07-20 13:02 UTC

Financial Health Assessment of SOUTHERN SOFTFLOW LIMITED

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1. Financial Health Score: C

Explanation:
Southern Softflow Limited shows a mixed financial picture. While the company maintains a positive net asset position and modest shareholder funds, there are concerning signs in its liquidity and working capital management, indicated by recurring negative net current assets in recent years. The financial condition is stable but displaying symptoms that warrant close monitoring and corrective action.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	27,919	Moderate investment in long-term assets, slightly reduced from previous years (healthy stability).
Current Assets	18,704	Marked decrease compared to prior years; current assets include cash & receivables.
Current Liabilities	29,371	High short-term obligations, which are more than current assets (red flag for liquidity).
Net Current Assets	-10,667	Negative working capital ("symptom of distress") indicating potential cash flow challenges.
Total Assets Less Current Liabilities	17,252	Positive, indicating overall solvency, but down from prior years.
Net Assets / Shareholders Funds	16,327	Positive equity base, showing the company’s net worth is above zero and stable.
Cash Position	Not separately disclosed in 2024, but decline implied from prior years.

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3. Diagnosis

Vital Signs & Symptoms Analysis:

• Liquidity concerns: The company has negative net current assets for multiple years, including the latest year, indicating that current liabilities exceed current assets. This is a classic "symptom of distress" suggesting potential cash flow constraints and difficulty meeting short-term obligations without additional financing or asset liquidation.
• Asset base: Fixed assets have decreased slightly but remain steady, suggesting no significant disposals or impairment.
• Net Assets: The company’s net assets remain positive, indicating that after accounting for liabilities, the company still holds value for shareholders. This is a "healthy heart" sign of solvency.
• Directors’ loans: The accounts note loans to directors that have been mostly repaid during the year, which improves the company’s liquidity profile. These are interest-free and repayable on demand, so they can provide flexible cash support.
• Profitability and reserves: Not explicitly given, but the stable net asset figure suggests the company is likely maintaining or slightly increasing retained earnings.
• Micro-entity status: The company operates under micro-entity accounting, limiting the depth of disclosed financial information, which can mask some risks.

Overall Financial Condition:

Southern Softflow Limited is currently solvent but shows liquidity strain due to negative working capital. The company is akin to a patient with a stable but weak cardiovascular system — the core strength (net assets) is present, but circulation (cash flow) is compromised. Without improved cash management, the risk of short-term distress grows.

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4. Recommendations

• Improve Working Capital Management:
  Address the root cause of negative net current assets by reducing current liabilities or increasing current assets. This could involve negotiating better payment terms with suppliers, accelerating collection from customers, or optimizing inventory.

• Enhance Cash Flow Monitoring:
  Implement rigorous cash flow forecasting and management to anticipate liquidity gaps and secure funding proactively.

• Capital Injection or Financing:
  Consider additional equity funding or short-term financing to bolster liquidity and provide a cushion against cash flow volatility.

• Director Loans Utilization:
  Maintain the availability of director loans as a flexible source of working capital, but formalize repayment plans to avoid future uncertainty.

• Expand Financial Reporting:
  As the company grows, consider moving beyond micro-entity reporting to provide stakeholders with more detailed financial insights, which can support better decision-making and external financing.

• Regular Financial Health Checks:
  Conduct periodic reviews of liquidity and overall financial health, especially in light of ongoing operating conditions and potential economic changes.

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