Chic Paints Ltd Essay Sample

1 Chic Paints Limited (CPL) are a large manufacturing company who specialise in producing niche specialist paints such as those used on boats, cars and industrial machinery. As a result of a management buyout from Ashstead Plc 6 years ago, CPL was bought by 5 of Ashstead’s directors who had previously formed the board on Chic Paints when it was a subsidiary of Ashstead Plc. CPL aims to manufacture paints and allied products that are expertly formulated to meet the highest international standards, using the best available technology for end user consumers.

4.2 Chic Paints is a private limited company with both the accounts department and the company as whole, having a relatively tall organisation structure. Since the formation of CPL 6 years ago, company has steadily reduced its turnover from £200 million to £120 million however has improved its gross profit margin from around 12% in 2007 to around 30% today. Since the MBO the company’s Net Assets have increased from £20 million to over £25 million; and the workforce has been reduced from around 500 to around 350 employees. The company currently has 5 Directors, a breakdown of which can be seen in the organisation chart in Appendix 1.

4.3 The main financial accounting software used is Microsoft Excel Spreadsheets. Having just been updated to the 2013 version, this software is used to record all accounting transactions. As well as Microsoft excel the accounts department also use a standalone full absorption costing system which is run on a proprietary costwise software, a standard costing variance system, a computer aided design/management system and Sage 50 Payroll. The Accounts department has 8 Personal Computers

4.4 External Stakeholders
4.4.1 CPL has a number of External stakeholders who are affected by the organisations actions but are not internal to them.

4.4.2 Customers
The company’s customer base is made up of both UK and International clients. The customer’s main interests in CPL are receiving good quality products and customer service and a receiving reasonable prices and credit limits. Customers are interested in the financial position of CPL as it shows how financially stable the company is and if CPL can supply goods long term.

4.4.3 Suppliers
The company’s suppliers use CPLs Statement of Profit and Loss as well as the cashflow statements to ensure CPL can continue to purchase products from them and are able to abide by the set credit terms.

4.4.4 HMRC
The HMRC will have a high interest in the company’s financial statements for taxation and regulatory purposes. The HMRC will use the company’s financial statements to ensure the correct amount of tax is being paid and that CPL are following the regulations set by the government.

4.5 External Regulations
4.5.1 The Companies Act 2006
The company must follow specific requirements set out by the companies act 2006 regarding how records should be kept and how the annual accounts should be prepared, distributed and filed. None compliance of the above will result in company penalties.

4.5.2 Accounting Standard UK
CPL must follow the requirements set of by Financial Reporting Standards (FRS) and the International Financial Reporting Standards (IFRS) when preparing financial statements.

4.5.3 Data Protection Act 1998
The company must follow the regulations set out in the Data Protection Act 1998 which controls how CPL use the personal information of Customers, Suppliers and employees.

4.5.4 Product Liability and Safety Law
As a large manufacturing company, CPL Must adhere to product safety laws and must ensure that all products produced and sold are fit for use. Failure to abide by product safety laws will result in legal action being taken against CPL with possible fines or imprisonment.

5 Accounts Department
5.1 CPL has a centralised accounts department who are collectively responsible for all aspects of accounting within the department. This includes general ledger, purchase and sales ledger, credit control, payroll and costing.

5.2 Accounts Department staff
5.2.1 Finance Director
The Finance director owns a 25% equity stake in the company, is BA (hons) and FCMA (fellow charted management accountant) qualified and is responsible for the general strategy of the company, as well as the planning and managing the financial strategy of the business. The finance Director also has an overall responsibility of all accounting, finance, legal and IT issues and personnel. Most of the general day to day responsibilities are delegated to the Chief accountant. The Finance Direct personal produces all of the annual company reports.

5.2.2 Chief Accountant
The Chief Accountant is both AAT and ACCA qualified and is responsible for the day to day running of and supervising of the accounts department. This includes the General Ledger Clerk, Purchase Ledger Clerk, Sales Leger Clerk and Credit Controller, Costing Technician, payroll clerk and personal database clerk and the Accounting System Technician. The Chief Accountant produces monthly management accounts, the annual budget, ensures that the working capital levels are kept to the level set by the Finance Director and manages the company’s day to day cash flow by approving all payments to suppliers and making VAT (IVA) and payroll taxes (NIC and PAYE) payments.

5.2.3 Payroll Clerk.
The Payroll Clerk is responsible for running the monthly payroll (salaried staff) and weekly payroll (hourly paid staff). The payroll clerk is AAT level 3 qualified and is currently studying AAT level 4.

5.2.4 Accounts Receivable Clerk and Credit Controller
The Accounts Receivable Clerk also acts as the Credit Controller despite not holding any qualifications in either area of accounting. As well as being responsible for operating the company’s accounts receivable ledger, producing monthly statements and reconciling the debtor’s payments. The Accounts Receivable clerk is also responsible for carrying out the company’s credit control procedures. The accounts receivable clerk has expressed an interest gaining a qualification in either area.

5.2.4 Other Accounts Department Staff.
4 other members of staff report to the Chief Accounts. These include the General Ledger Clerk who is responsible for entering all suppliers invoices and credit notes on the accounts payable ledger, issuing debit notes, reconciling statement to the accounts payable ledger and controlling creditor payments; The General ledger Clerk who is responsible for all of the data the is required to be directly input into the system, producing month/quarter/year end trail balances, maintaining the company’s cashbook and petty cash and recommending monthly provisions to the Chief Accountant; The costing Technician is responsible for costing all of CPLs paint ranges, product ranges and recommending minimum selling prices. The costing Technician is not interested in receiving any further training and has no accounting qualification and the Accounting Systems Technician is responsible for reviewing accounting systems and procedures;

5.3 Internal Stakeholders
The internal stakeholders of the company are the employees and the shareholders.

5.3.1 Employees
The employees of CPL are directly affected by the actions of the company and are directly linked to the organisation. The employees have a vested interest in how well the business is performing, as this directly affects job security and they ability of the company to pay wages efficiently.

5.3.2 Shareholders
The shareholders have a specific interest in how the company are performing. By reducing costs and improving revenue the shareholders will have an increase return on investments in the company and will receive a higher dividend.

5.4 Weaknesses
5.4.1
Payroll Clerk performs weekly and monthly payroll runs using Sage 50 Payroll and yet has not received any formal system training.
5.4.2
The accounts receivable clerk if overworked and the section is understaffed

5.4.3
Some wages are paid in cash
5.4.4
The Human Recourses Manager has full access to the payroll system

5.5 Recommendations
5.5.1 The Payroll clerk should attend formal Sage 50 Payroll training. This will give the Payroll Clerk a better understanding of the system and reduce the risk of errors being made due to lack of knowledge.

5.5.2 An additional staff member needs to be hire to either cover Accounts receivable or Credit control. This will free up time for the current Accounts Receivable Clerk and credit controller and will enable them to focus on one area rather than 2.
5.5.3 CPL should pay all its employees by BACs. This will reduce the risk of theft and transactional discrepancies

5.5.4 The Payroll system should be tailored to only allow the Human Resources manager to the specific areas needed and should also be linked to the main accounting system. This will reduce the risk of mistakes on the system, as well as reducing manual errors from the payroll information being manual input on to the system.