4.1 Chic Paints Limited is a large, shareholder run company that manufactures specialist paints – such as those used on boats, cars and industrial machinery. It is a limited company, formerly part of Ashstead PLC, but was the subject of a management buyout from its previous owners six years ago by five of its directors. Greg Pearce, Dave Whistler, Ruth Jones, Ahmed Khan and Susan Mather are the current directors and all have shareholdings in the company.
4.2 Six years on, the company has steadily reduced its turnover from £200 million to £120 million but has improved its gross profit margin from around 12% at the time of the management buyout to around 30% today. Net assets over the same period have, however, increased from £20 million to over £25 million; and the workforce has been reduced from around 500 to around 350 employees.
4.3 The organisation adopts a hierarchal or ‘tall’ structure as shown by the Organisation Chart which is included as Appendix 1 to this report. This type of organisational structure is typical for a large company, where accounting systems are the responsibility of the Finance Director.
4.4 The accounts system in use is a decentralised system consisting of eight stand-alone computers. For the sake of keeping costs low, the main financial accounting system in use operates using Microsoft Office 2010 Excel spreadsheets and the payroll system is run using Sage 50 Payroll software. All computers must be individually password protected; only the employee and their line manager must know the password.
4.5 External regulations affecting the organisation:
4.6 The Company’s Act 2006 – This sets out the way in which financial statements should be prepared and gives companies a detailed format of how the profit and loss account and balance sheet should be drawn up, the precise wording that should be used and a great deal of detail about the information that must be shown in the...