Business means risk! Financial Institutions, for example, Bank gives business loans to customers. 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 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 periodical statement of a business to be recorded in accounts by physical verification and count that to be submitted to financing institution or bank. The Stock Statement must contain the quantity and value of goods or products in stock of the business to be tallied within the period of submission to the bank.
Most of the banks ask this statement to their customer who has availed Business loan either Cash credit (CC) or Over draft (OD), in order to protect bank's interest over the amount they have issued for business. Some banks asks 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, provides their own statement format but some may ask general stock data.
What Information Bank Seeks from a Stock Statement?
Bank 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 must have a justifiable value of inward stock 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.