STORE & FINANCIAL MANAMAGEMENT

Introduction:
Purchase:
• Purchasing is a task usually performed my almost each and every individu
al.
• Living will is difficult in modern society without purchasing.
• We depend on purchase because we can not produce everything that we need
.
• Finance is the main thing in each an every purchase.
• When a business concern makes a purchase, it has to take into account ma
ny factors like its requirement, price, availability of funds, availability of s
torage space, loss of interest, blockage of funds, go down rent, quality, future
availability of materials, future price of such material etc.
• Success of an organization also depends upon the care with which materia
l and equipments are purchased.
• To be successful in business one has at right price, at that right time
and right quality.

Procedure in making purchases:

1. Receiving the purchase requisition.
2. Exploring the source of supply and choosing the supplier.
3. Placing the purchase orders.
4. Receiving, testing and inspecting the materials
5. Checking and passing the bill for payment.
o Receiving The Purchase Requisition
• The store keeper is the person who keeps all the materials need in the o
rganization in his store and issues it to different department as per their requ
irements.
• So, any item needed in the organization it is the store keeper who knows
first.
• When he knows about the needs of particular materials, he informs the pu
rchase department to purchase the materials.
• The store keeper “purchase requisition” for the purchase department.
• The store keeper prepares three copies of “purchase requisition”. The or
iginal sent to the dept, one copy is sent to the dept. requiring the materials a
nd last copy is kept by him.
• Purchase requisition is a performance to be filled by the store keeper w
hich contain Name material, code no, quantity, size, time specification etc.
It is basically of two types……….
1. For regularly needed materials and for less costly materials, the purcha
se requistion is known as “Regular purchase requistion”.
2. But for special, costly and occasionally requird materials it is known a
s “Special Purchase Requition”.
o Exploring the source of supply and choosing the supplier:
• The purchase department usually maintains a list of all the materials ne
eded in the organization.
• It also meaintains a list of various supplier for different materials.
• The purchase department also keeps complete information about new materi
als, their sources, their advantages and disadvantages etc.
• Best supplier may be chosen keeping in mind the genuineness, reliability
, past experience, past performance, financial stability and records of the supp
lier.
• Purchase should be at the best price not necessary the lowest price.
o Placing purchase orders:
• After selecting the supplier, the purchase department has you prepare pu
rchase order.
• Purchase order is a request by the purchase department to the supplier t
o supply specific materials as per quotation or agreement.
• Purchase order contains the name of materials, its specification, size,
description, quantity, price, discount, quality, date of delivery, etc...

o Receiving, testing and inspecting the materials:

o Checking and passing the bill for payment:

• After supply is over, the supplier will prepare a bill and send it to th
e purchaser.
• The purchase dept on receiving the bill will compare it with the copy of
purchase order; goods received note, challan and inspection note.
• If everything satisfying the bill may be sent to accounting dept.

CENTRALIZED PURCHASING:
• When all the requirement of an organization in purchased by one departme
nt or individual, it is known as centralized purchase system.
Advantages
• When goods are purchased in large quantities, the last of purchase will
be less more discount can be obtained from the supplier.
• Centralized purchase helps to eliminate unnecessary purchases.
Disadvantages
• Centralized purchase system involves slow and complicated procedure for
purchase of even a small item.
• There is a lot of control on all purchase even for a small purchase.
DECENTRALIZED PURCHASING:
• When different department and selections of the organization purchase th
eir own requirement separately, it is known as de-centralized purchase system.
Advantages
• Under decentralized purchase system, there may be quick and prompt purch
ase of different items.

Disadvantages
• In this different items may be purchased in small quantities resulting i
n higher cost of purchase.
BIN CARD
• All the materials in the stores are not kept at one place but different
places for easy identification.
• The place or space assigned to a particular material is called a ‘BIN’.
So the store contains a number of bins and all the bins are numbered in a logica
l order.
• A card is attached to the bin which known as “BIN CARD”.
• Bin card helps the store keeper to control the stock.
• Bin card provides information about maximum stock level, minimum stock l
evel, ordering level, danger level etc…
SORES LEDGER
• The store-keeper also maintains a big register for recording the receipt
, issue and balances of different materials in the store. Such register is known
as “Store Ledger”.
• The register contains an account an account for all the items of the sto
re.
• Store ledger is identical to that of a Bin card except the quantity whic
h is shown in their money values in the store ledger.
• Store ledger also helps the store keep control the stock.
GOODS RECEVED NOTE:
• The person receiving the materials in the organization, has to prepare a
goods received note.
• In a small organization good received note is prepared by store keeper.
• Goods received note is perform which contains the details of materials r
eceived such as quality, specification, price, purchase, order no etc…
• Goods received note in prepared in triplicate one copy is sent to purcha
se dept, one copy is to accounting dept, the last copy is kept by store-keeper.

FINANCIAL MANAGEMENT IN CONLIXT WITH S.S.I(Small Scale Industry):

• For S.S.I the finance function is usually managed by the entrepreneur hi
mself.
• He has to perform all the functions performed by a financial manager in
a big undertaking.
• He has to plan and collect trends for the entire enterprise.
• Collection of trends is a hard task for the entrepreneur. So for startin
g a S.S.I concerned.
• As he is a small businessman. He can’t collect funds by selling shares.
So he has to case his own funds, borrow from relatives.
• To be successful in a business, the person has to plan and marage his fi
nancial activities with ultimate care.
CAPITAL:
• The entire amount of money invested in a business is known as the capita
l of the business.
• So the requirement of capital depends upon the types of business, size o
f exit, volume of production etc.
• Capital of a business may come from various sources as owners funds, bor
rowed funds, loans etc.
• Capital of an organization divided into two types::
1. Fixed capital
2. Working capital
FIXED CAPITAL:
• The amount of money invested in fixed assets like land and building, pla
nt & machinery, furniture, tools and equipment etc is known as fixed capital.
• It is to used to meet the permanent and long term need of business.
• A large amount of money is blocked for a long period of time in the form
fixed capitals. Hence fixed capital as known as block capital.
• The amount of block capital depends upon the nature of industry, size of
unit, technique of production, volume of production etc…
Working capital:
• Working capitals in that portion of capital which is utilized to meet th
e day to day requirement for smooth running of a business.
• It is required for purchase of raw materials, payment of wages, salaries
, rent, taxes, electricity bill, advertising, transportation etc…
• Working capital is known as capital and circulating capitals.
• Working capital is needed because cash is not converted into cash instan
tly.
• It takes a long time the cash into each once again, because it has to pa
sses through various stages.
• The process of converting cash into cash once again through various stag
es in a cyclic process and is known as “Operating Cycle”.

FACTORS DETERMINIG THE WORKING CAPITAL REQUIRMENTS:

1. NATURE OF BUSINESS:
• It is a public utility undertaking like electricity undertakings like el
ectricity, water supply, railway etc, then working capital need is very limited,
fixed capital need is elusive high. In case of manufacturing organization fixed
capital requirement is very high.

2. SIZE OF BUSINESS:
• The bigger enterprise or business unit, the bigger will be the amount of
working capital needed.
3. SEASONAL VARIATIONS:
• There are some products which are seasonally demanded and there are some
products whose raw materials are seasonally produce.
• If the raw material is available in a particular reason then the manufac
turing organization is bound to purchase raw material in bulend bulk to be consu
me thought the year.
• For this type of organization working capital requirement is more.