Introduction to business (Section 4)
Which accounting function will you be reviewing? Accounts Receivable/Credit Control
Overview of the business (PC 1.3)
How big is the business – staff, offices, turnover?
Chic Paints Ltd manufactures and supplies specialist paint products such as those used on boats, cars and industrial machines. It operates business to business.

The company was formerly part of Ashstead Plc, but was the subject of a management buyout (MBO) from its previous owners in 2008 by five of its directors, whom had managed the company for many years. Prior to the MBO the Ashstead Plc operated a conglomerate manufacturing a wide range of products but this was considered to be no longer viable and as a result Chic Paints Ltd was sold off. Following the MBO the company moved away from the household paints market and towards the niche market of specialised paints as there is less competition and profit margins are higher.

The shareholding of the company is as follows:

Managing Director 25% shareholding
Finance Director 25% shareholding
Sales Director 20% shareholding
Production Director 15% shareholding
HRM Director 15% shareholding

The Sales and Production directors have indicated that they would like to sell their shares and retire. In July 2 possible replacements were found who are thought to have the necessary skills.

Chic Paints Ltd turnover is currently £120 million having steadily reduced from £200 million over the 6 years but profit margins are around 30% having risen in the same timeframe from 12%. Net assets are over £25 million and the company employs 350 staff.

Who are the businesses major stakeholders (internal and external) and why?

Stakeholders of the business would include internal and external parties who have an interest in the business.

The major stakeholders of Chic Paints Ltd would include the following:

• Shareholders - Would be interested in the business making profits so they receive their dividends.
• Employee - Would be interested in their jobs and wages.
• Suppliers - Would want to ensure that Chic Paints Ltd continues to buy from them and that they receive payment for goods supplied.
• Customers – Would be interested in the Chic Paints Ltd being able to supply them with the goods as and when they need.
• Bank – Would be interested in the company in relation to their bank loan agreement.
• HMRC – They would be interested in ensuring that Chic Paints Ltd complied with tax regulations for example and that tax was paid.

An example of another stakeholder who may have an interest in Chic Paints would be environmental groups who may want to ensure they are environmentally friendly for instance.

Accounts Department (PC 1.1, 1.4)
How big is the Accounts department? What is the purpose of the accounting function? What type of organisational structure is there? Where does the accounts department get its information from? How does the accounts department inter-relate with other departments within the business?

The Accounts Department consists of the Finance Director who has overall responsibility for all accounting, finance, legal and IT issues and personnel. Many of these day-to-day responsibilities are delegated to the Chief Accountant. He also produces the annual company report, including its statutory accounts; deals with all banking and finance issues; fulfills the role of company secretary and handles all legal issues.

The Chief Accountant is responsible for the day-to-day running of CPL’s Accounts Department. She has a number of staff reporting to her including the Costing Technician, Payroll Clerk, Accounts Payable Clerk, Accounts Receivable Clerk and Credit Controller, General Ledger Clerk and Accounting Systems Technician. She personally produces the management accounts, bottom up annual budget production and co-ordination, authorises payment of invoices, make NIC and PAYE payments, managing day to day cashflow and ensuring the working capital cycle is kept to