Business means risk! Financial Institutions, for example banks, give business loans to customers based on calculated risk. After giving business loans, how banks take steps to monitor and overcome the risks involved in the deal? Here comes the importance of Stock Statement. Why does bank bother about the stock statement? Because, if you don't repay their amount taken as loan, bank has right to acquire your stocked goods or products and sell it out through auction method.
What is Stock Statement?
A Stock Statement is a periodical statement declaring details of goods stocked in godown or business premises to accomplish business sales. It must be collected by Bank or Financial Institution as a documentary evidence from its customer who has taken business loan. To keep the business up and running, lending institution should physically verify and record the Stock Statement data in their accounts and make sure both data (Stock Statement data and physically verified stocks) must be tallied within the period of submission.
A typical Stock Statement Should Include:
- Item description.
- Location where goods stored.
- Quantity of opening stock.
- Purchased goods.
- Items sold.
- Quantity of closing stock.
- Rate of each items.
- Total value of the goods stored.
Why Should Bank Need Stock Statement?
In order to protect bank's interest over the amount they have given for business, most banks ask Stock Statement from their customer who has availed Business loan either Cash credit (CC) or Over draft (OD). Some banks ask stock report to be submitted every month (monthly stock statement) in a particular date wherein some may ask quarterly or half yearly or even annually. Frequency for submission of the Stock statement report shall depend on the nature of the business, loan type, and of-course varies bank to bank. Some banks, like SBI, provide their own statement format but some may ask general stock data which is given here.
What Information Bank Seeks from a Stock Statement?
Banks usually eager to know two things from this statement. First, how possible this loan be met at maturity? And, secondly, if something went wrong, how the loan amount be paid back?
They wanted to know how the disbursed amount has been spent over the time by checking the net stock inwards vs net stock outwards of the products and its value including opening stock balance and closing stock balance in a particular period. If the net value of inwards and outwards do not tally, bank may ask justification prior to disburse the fund for further business. Hence the inventory statement (stock statement) must have a justifiable value of inward stocks and outward stocks.
How to Prepare a Stock Statement for Bank loan?
Preparing a stock statement is simple if you have maintained good and upto-date inventory system. The attached stock statement format in pdf has sample data that gives you an outlook of what is expected by bank in terms of value of the stock as well as physical goods. All the columns of the attached stock statement in xls are self explanatory except Rate column. When consider rate, it should be Market value less your margin ie., profit and overhead.
How to find Opening Stock?
Opening stock is the forwarded stock from the previous accounting period which may be monthly, quarterly, half yearly or yearly on an accounting system. Opening stock includes, raw materials in stock, work in progress and finished products.
How to find Closing Stock?
Closing stock is the remaining stock at the end of an accounting period which may be monthly, quarterly, half yearly or annually. It includes, raw materials in stock, work in progress and finished products.
Here is the mathematical way to find the value of closing stock: cost of opening stock + cost of new stock that is purchased during the accounting period - cost of outward stock.