TIM JONES CONSULTING LTD

Executive Summary

Tim Jones Consulting Ltd shows early-stage financial distress with negative net assets and working capital deficits, though cash balances are improving. The company is reliant on director loans, indicating liquidity risk and balance sheet weakness. Immediate actions to enhance capital, manage liabilities, and improve profitability are critical for sustainable financial health.

TIM JONES CONSULTING LTD - Analysis Report

Company Number: 14121265

Analysis Date: 2025-07-29 16:02 UTC

Financial Health Assessment for Tim Jones Consulting Ltd

Assessment Date: Financial year ending 31 May 2024

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1. Financial Health Score: D (Weak Financial Health)

Explanation:
The company shows persistent negative net assets and shareholders’ funds, indicating a balance sheet "symptom" of financial distress. Although cash balances have increased year-on-year, current liabilities exceed current assets, resulting in negative working capital. This suggests the company operates with a liquidity shortfall, a warning sign for ongoing operational health.

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2. Key Vital Signs (Core Financial Metrics)

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	10,992	5,322	Cash increased, positive sign for liquidity
Current Liabilities	12,495	5,351	Increased liabilities, mainly director loans
Net Current Assets (Working Capital)	-1,503	-29	Negative working capital: liquidity concern
Net Assets (Shareholders' Funds)	-1,503	-29	Negative equity: accumulated losses or funding shortfall
Cash	10,992	5,322	Healthy cash inflow but insufficient vs liabilities
Number of Employees	2	2	Stable small workforce, typical for micro-business

Interpretation of Vital Signs:

• The company’s cash "heartbeat" is strong relative to previous year, nearly doubling, which is a positive symptom indicating better cash inflows or funding.
• However, the liabilities, especially director's loan accounts, have more than doubled, indicating the company relies heavily on shareholder/director funding to cover its short-term obligations.
• Negative working capital and net assets reveal the company’s balance sheet is under strain. This condition is analogous to a patient whose vital signs show improvement in one area (cash) but worsening in another (liabilities), signaling an underlying health issue.

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3. Diagnosis: Financial Condition Assessment

• Liquidity Risk: Negative working capital (-£1,503) means the company currently does not have enough short-term assets to cover short-term liabilities. This "cash flow symptom" could lead to difficulties in meeting immediate payment obligations without continued director support.
• Balance Sheet Weakness: Negative net assets indicate the company has accumulated losses or the equity base is insufficient to absorb liabilities, reflecting financial fragility.
• Funding Dependency: The substantial increase in director loan accounts (£12,495 from £5,352) suggests the business is dependent on internal funding. This reliance can be risky if the director cannot continue lending or if external financing is needed.
• Operational Scale: With only 2 employees and turnover not disclosed here (likely small given company size), the business is in its early stage and appears to be operating at a small scale, consistent with a micro or small company profile.

Overall Diagnosis:
The company exhibits symptoms of financial distress primarily due to its negative equity and working capital deficit, albeit with improving cash balances. It is currently "surviving" on director loans, which raises concerns about sustainability if this support is withdrawn.

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4. Prognosis: Future Financial Outlook

• If the company can maintain or increase its cash inflows and manage to reduce or stabilize liabilities, especially director loans, financial health could improve.
• However, without a plan to generate positive retained earnings or secure external funding, the company risks worsening liquidity issues and balance sheet insolvency.
• Given the company is very young (incorporated 2022), early losses and negative equity are not unusual, but attention is needed to avoid chronic financial weakness.

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5. Recommendations: Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Aim to reduce current liabilities by repaying director loans if cash allows or renegotiating terms to reduce pressure on short-term liquidity.
   • Tighten control on expenses and improve cash collection processes to boost operating cash flow.

2. Increase Capital Base:

   • Consider injecting additional equity funding to shore up negative net assets and improve balance sheet strength.
   • Explore external financing options such as small business loans or grants if feasible.

3. Enhance Profitability:

   • Focus on improving service offerings and pricing strategies to increase turnover and generate retained profits.
   • Monitor contract profitability rigorously to avoid unprofitable engagements.

4. Regular Financial Monitoring:

   • Implement monthly cash flow forecasts and management accounts to detect early signs of distress and act proactively.
   • Engage with financial advisors or accountants for ongoing financial strategy and compliance.

5. Director’s Role and Risk Management:

   • Formalize director loan agreements with clear repayment terms and interest policies to mitigate risk.
   • Consider diversification or partnerships to spread business risk.

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