Periodic vs Perpetual Inventory System: Which Should You Pick?
The debate between periodic and perpetual inventory systems has always been a significant consideration for many business owners. Effective inventory management often comes down to choosing between these two options, each presenting its own benefits and drawbacks. Understanding the uses of both systems can make it easier to decide which one to implement.
In this article we’ll provide a breakdown on some of the key differences between periodic and perpetual inventory systems.
Periodic vs Perpetual Inventory Systems
Periodic inventory systems, as the name suggests, is a method of inventory management that involves counting inventory at the end of a specified period. It could be days, weeks, months, sometimes even a year.
On the other hand, perpetual inventory involves continuously tracking products as they move through the supply chain. Stock is updated as soon as a product is either received or sold at any point of sale, resulting in constant changes in inventory tracking.
But which stock control system should you pick for your business?
Periodic Inventory System: Why Should You Pick This?
Periodic inventory systems begin by establishing the initial inventory level at the start of a specific time period, and then record all incoming inventory, such as purchases from suppliers, throughout that period.
Depending on the inventory size, intervals may vary from a few weeks to several months.
This system offers several advantages, one of them being, fewer steps, meaning less maths and other computations, which frees up time to focus on other business needs.
It is also cost-effective, as you only need to count inventory at regular intervals and do not need to invest in a computer system for constant stock monitoring.
Additionally, it enables detailed reporting. With data gathered at specific intervals, stock control can be improved with comprehensive reports for all products, allowing owners to focus on which stock to prioritise in their sales or purchases.
Perpetual Inventory Systems: Why Should You Pick This?
Perpetual inventory systems update the product list after each transaction, including sales, returns, and purchases. This system is suitable for various businesses with different inventory sizes. It is more sophisticated than periodic inventory, using a fast computing system to monitor the business and support its overall growth.
In addition to real-time inventory tracking, perpetual inventory systems offer several other advantages for businesses. First, they provide accurate and up-to-date inventory data, which can be used in conjunction with sales analytics or reporting software to identify trends and customer preferences. This valuable insight can help you make informed decisions about stocking, pricing, and promotions.
Another valuable advantage to consider is the ability to manage multiple locations with ease. Manual inventory monitoring can be time-consuming and labour-intensive, but with a perpetual inventory system installed, all you have to do is counter-check the data and ensure it matches the inventory levels to avoid stock shortages.
Final Thoughts
Both systems are effective for managing inventory; however, the nature and type of business should play a significant role in selecting a system. A company with a small inventory should benefit from a periodic system, while a larger business with complex inventory levels should opt for a perpetual system.
Eurostop can help you determine the best system to meet your business needs. Consult our experts now and learn more about our retail management solutions.
