Agri-Input Dealer and Distributor Audit: Credit, Stock and Seasonality

An agri-input audit checks that seasonal credit given to farmers is real and recoverable, that seeds, fertilisers and pesticides in stock are within expiry and licensed, and that company schemes and subsidy-linked claims are recorded correctly. Most of the year's money moves in two short seasons, so cut-off and receivables carry the most risk.

Last reviewed: 17 October 2026. Facts checked. This post sets out an audit method. We did not run a web search for it and did not open any statute, order or notification. It names laws only so you know what to look up and gives no rates, thresholds or licence limits. Check current text for the state concerned. We checked existing site posts to link only to pages that exist.

What is distinctive about agri-inputs

• Sales peak before sowing seasons and slow sharply after. Stock and credit swing with the calendar.
• Much of the selling is on credit to farmers until harvest, so receivables can be old and informal.
• Products are regulated: seeds, fertilisers and pesticides need licences, and each has labelling and storage rules.
• Shelf life is short for some seeds and pesticides. Expiry can wipe out stock value.
• Manufacturers run schemes: volume discounts, cash discounts for early payment and year-end incentives.
• Some products are sold under government control or subsidy arrangements that bring extra records.
• Weather and crop prices drive demand and collection.

Key risks

1. Receivables. Farmer credit that will not be recovered, or balances with no signed record.
2. Expiry and damage. Seeds and pesticides past shelf life carried at cost.
3. Licence breaches. Selling a product outside licence terms or without records.
4. Scheme income. Manufacturer rebates and incentives booked on receipt or not tracked.
5. Stock count. Bulk bags, open bags and goods stored at several godowns.
6. Cash sales. Cash transactions with limited paper trail.
7. Cut-off. Season-end billing and returns moving between years.
8. Related-party and agent dealing. Sales through agents on commission or to group concerns.

Audit programme in steps

Step 1: Understand the business and calendar

List products by category, suppliers, godowns, licences and the selling seasons. Note which customers are retail farmers, other dealers or institutions. Read the supplier agreements for margin, scheme, credit period, return and expiry terms.

Step 2: Test licences and compliance records

Check that each licence is current for the premises and product categories handled. Confirm that sale and stock registers required by law are kept. A missing or lapsed licence can stop the business and should be reported in management discussions.

Step 3: Observe and value stock

Use the stock count procedures and plan the count close to year end. Add these steps:

• Read batch numbers and expiry dates, and list items near or past expiry.
• Count opened and partly used packs separately.
• Confirm stock held by third parties or in other godowns.
• Compare physical stock to the stock register and to stock statements submitted to banks. See stock statements for banks.

Provide for expired and unsaleable stock, and check whether the supplier accepts returns.

Step 4: Test sales and cut-off

Sample sales invoices around season start and end. Match them to dispatch records and stock movements. Check that returns and replacements after year end are provided for. Review cash sales for bill sequence and daily cash banking.

Step 5: Test receivables

List customer balances by age and season. Obtain written confirmations for a sample, and where farmers cannot be confirmed in writing, test subsequent receipts and visit a few if the amounts justify it. Review the practice of carrying forward unpaid balances year after year without any documentation. Consider expected credit loss using the applicable framework. The working capital post shows where receivable cash hides.

Step 6: Test scheme and incentive income

For each manufacturer, recompute the rebate or incentive from the scheme terms and your purchases or sales. Compare to credit notes received and any receivable at year end. Rebates that depend on year-end targets need an estimate and support. See the procure-to-pay checklist.

Step 7: Test payables and supplier balances

Reconcile supplier statements. Check cash discount terms and whether they were earned. Suppliers who are micro or small enterprises bring the payment-time rules; see the MSME payables audit post.

Step 8: Review commission agents and related parties

List agents and their commissions, and compare to the agreements. Review dealings with relatives or group concerns for price and settlement. Use related-party procedures.

Step 9: Review bank finance and cash flow

Seasonal businesses often use cash credit. Check drawing power against stock and book debts, interest and covenant compliance. Our drawing power guide shows how.

Step 10: Review tax and statutory dues

Check GST on goods supplied, since rates and exemptions differ between inputs, and confirm current rates from notifications. Check TDS on payments, and where the business is a dealer, check the use of any presumptive tax scheme the law allows. Test payroll dues for godown and shop staff.

Common findings

• Farmer balances carried for years with no confirmation.
• Expired seed or pesticide stock still at full cost.
• Rebates recognised only when cash is received.
• Licence renewals missed, or product categories not covered.
• Season-end returns not provided for.
• Stock statements to banks that do not match the count.
• Cash sales without proper bills.

Which Indian laws to check

Name only. Verify current text:

• The Fertiliser (Control) Order and related orders under the Essential Commodities Act, 1955.
• The Seeds Act, 1966 and rules, and any later seeds legislation in force.
• The Insecticides Act, 1968 and rules.
• GST law for agricultural inputs.
• The Income-tax Act for TDS, and for presumptive schemes where applicable.
• The Companies Act, 2013 and CARO for company dealers.
• State laws on licensing and agricultural marketing.

FAQs

What is the main risk at an agri-input dealer?

Farmer credit that cannot be recovered, followed by stock past expiry.

When should the stock count be done?

Close to year end, and after the main selling season if the year end falls in the off-season.

Do these businesses need licences for each product?

Generally licences cover specific categories. Check the licence terms for each premises.

Related Articles

• Stock count procedures
• Drawing power calculation guide
• Working capital leakage
• MSME payables audit

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