How Does the Perpetual Inventory System Work?Įvery time merchandise is bought or sold, the perpetual inventory system will continuously update inventory levels automatically. If you want to learn more about the details and uses of periodic inventory, head over to our guide on the periodic inventory system. That’s why most businesses nowadays, use perpetual inventory systems to manage their inventory.īeing able to check inventory levels and the cost of goods sold, in real-time, can save your employees and your business a considerable amount of time and money. This type of inventory management involves physically counting all your stock (at regular intervals) and cross-referencing that data with the sales data to find any discrepancies.Īs you might have guessed already, this process is extremely tedious, time-consuming, and prone to a lot of errors. In a periodic inventory system, on the other hand, reports of inventory and cost of goods sold aren’t kept daily, but periodically, usually at the end of each fiscal year, or at the end of each month. For instance, take grocery stores - each time a product is bought and scanned, the system updates inventory levels in the database. With a perpetual inventory, all transactions involving costs of merchandise get recorded immediately as they occur. While we did explain above the main difference between periodic and perpetual inventory systems, we did not cover all the core features that differentiate the two. Small businesses that are looking to expand, or want to take more control over their merchandise, also prefer a perpetual system, as there are plenty of intuitive and low-cost perpetual software options in the market today. So, for the most part, large businesses with a high number of sales and several retail outlets, such as pharmacies, and grocery stores require a perpetual inventory system. When business owners or management need up-to-date information about inventory levels, then using a perpetual inventory system is the way to go. #DEFINE POINT OF SALES SYSTEM HOW TO#If you want to learn more about inventory accounting, and how to properly streamline your inventory management process, head over to our complete guide on inventory management. Make sure to occasionally check your actual physical inventory and compare the total displayed by the perpetual inventory system. #DEFINE POINT OF SALES SYSTEM MANUAL#With that being said, there are a few factors that may require manual input in the system, such as theft, damage, or loss of inventory. The system lets you access inventory reports at any time, updates stock levels, and almost completely reduces human errors through automation. #DEFINE POINT OF SALES SYSTEM FULL#With a perpetual inventory system, each sale or purchase of merchandise is updated on a real-time basis automatically, thus providing you with a full financial picture of your inventory levels.
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