Generally, businesses rely on two primary inventory management systems: Perpetual Inventory System and Periodic Inventory System.
Perpetual inventory management is a system that tracks real-time transactions of received or sold stock via the use of technology. Periodic inventory system, on the other hand, updates inventory periodically.
This means, if you want up-to-date records on your internal inventory, then perpetual inventory management will have all the answers, unlike periodic list. A perpetual inventory system is always work-in-progress, making it a superior inventory management system instead of periodic inventory.
Also, perpetual requires human resources for conducting a physical audit of inventory and the cost of goods sold (COGS), while a perpetual inventory system is automatic.
Here we’ll look at the features of a perpetual system and outline why businesses should adopt a perpetual inventory management system:
Real-time Data recording
Perpetual inventory system records sales, returns, discounts, and other transactions on an ongoing basis. This ensures each and everyone who is part of the system has access to data at any time. More importantly, it allows businesses to keep track of real-time demand. This is important as businesses keep growing and become more complex.
Up-to-data info on Stock for Better Decision Making
As it turns out, you could compile more information about your business. The more detailed info you have about your business, the better decisions you’d be able to make in the long run. A perpetual inventory system records information that is useful for demand forecasting and other performance indicators. Continuous information about stock quantity is essential because it helps avoid stockout situations.
Zero employee involvement
A perpetual inventory system enables managers to compare information against physical inventory for discrepancies. Sure enough, physical inventory checks are good for the company, especially to check theft, spoilage, human errors, and more. However, daily checking could be avoided, thereby saving on staff costs. It also saves time for the staff as they no longer have to engage in tedious inventory counts to determine the amount of stock available. Some of the world class order management software is listed in this page. Take a look.
Probing Stock level discrepancies
As with the periodic inventory system, the year-end inventory balance is matched with the physical inventory count. Also, theft, shrinkages, and errors are not considered as only the physical inventory count is used for accounting for the cost of goods sold.
On the other hand, a perpetual inventory will allow you to probe discrepancies and make necessary stock adjustments.
Demand forecasting to grow your business
Excel sheets are ideal when you want a quick glimpse of your present inventory situation. However, as your business grows, demand forecasting becomes an indispensable part of your inventory management process. For retail and wholesale businesses that witness seasonal fluctuations in demand require historical inventory information on sales and inventory to make purchasing decisions in the future. This is where perpetual inventory management comes into the picture. And, no, it won’t cost tens of thousands of dollars to run an inventory management system. With cloud-based technology and SaaS solutions, even smaller companies can have access to forecasting technology.
It goes without saying that software with such streamlined features such as perpetual inventory management doesn’t come cheap, and plus, you need support staff as well to run the software. If you are a small business running a car dealership or an art gallery with low sales volume, and if the inventory can be tracked manually, it’s better to opt for a periodic inventory accounting system.
On the other hand, businesses with high sales volume, like grocery stores or pharmacies, and numerous retail outlets should use perpetual inventory systems as they could easily figure inventory-related errors. More importantly, it shows all transactions in full for every individual unit.