Cost Analysis Isys Chic Paints

johnny360

Hi I am trying to do a cost analysis on Chic Paints case study for segregation of duties. If they introduced a new member of staff they would be able to keep on top of chasing bad debt which would save the company ?? per year. There aren't many figures to go off to calculate the bad debt percentage on account receivable. The turnover is 120 million so do I randomly make up a percentage of what the bad debt would be or am I missing something?

Amy Smith

Hi Johnny
I'd take a very basic approach to this:

Say they give 30 days credit terms and year end is 31 December 20XX

120million/12 = approx 10million of sales a month

Half of these sales on credit for example so 5million per month

5million of sales in December approximately outstanding at year end if every customer takes 30 day credit terms to the max - high risk of irrecoverable debts. Take a percentage of say 5%, and still £250k could be outstanding.

Does this make any sense? haha

johnny360

Thanks Amy, so I could just use any percentage I don't need to say how I came to using 5%? It just seems a bit random thats all.

hasan

Hi amy from essex please can you help me with the appendices

Amy Smith

Johnny - you will need to explain why you're using the 5% like I have above, but as long as it's reasonable you will be fine.

Hasan - appendices you definitely need:
1) Source of information ie websites used for research
2) Organisation chart, this should just be a flow chart showing the members of staff in the finance department and how they relate - this will be given in the information
3) Fraud matrix - taken straight from the plan you completed
4) Cost benefit analysis - just a detail of the costs for the recommendations you made. No particular format, just needs to clear and concise.

You can obviously add any more appendices but these 4 are required. It is important you mention these in the report in order.

Hope this helps

hasan

Much Obliged Amy