Did you know that US Business Inventories are a an all-time high?

You may have heard of both periodic and perpetual inventory systems, but you're not sure which one is right for your business.

It can be tough to decide which inventory system to choose for your business. On one hand, there's the perpetual inventory system, which is simpler but requires more upkeep. On the other hand, there's the periodic inventory system, which is more complex but doesn't require as much maintenance.



So what's the difference? Keep reading because in this periodic inventory guide

we'll show all of the important differences between a periodic vs perpetual inventory system.

What Is a Periodic Inventory System?

A periodic small business barcoding inventory system is a traditional method of tracking and managing inventory levels. It requires taking a physical count of all the items in stock at specific intervals, such as monthly or quarterly.

This method can be more labour-intensive and time-consuming than perpetual inventory systems and may require dedicating additional resources to the task.

What Is a Perpetual Inventory System?

A perpetual inventory system is a more modern method of tracking and managing inventory. It uses barcodes, RFID tags, or other technology to constantly track and update information about items in real time as they are bought and sold.

This type of system allows business owners to always have an up-to-date view of their inventory, which can help them better manage their stock levels and avoid shortages or overstocking.

The Differences Between Periodic and Perpetual Inventory Systems

Now that we’ve discussed the two types of inventory systems, let’s dive into the differences between them. They include:

1. Amount of Effort

When it comes to effort, the perpetual inventory system requires much less than the periodic system. That’s because much of the work is done automatically with technology and does not require manual counting or tracking of each item in stock.

2. Accuracy

The accuracy of a perpetual inventory system is far greater than that of a periodic system. This is due to the constant data collection and updating of stock levels.

3. Timeliness

The timeliness of updates is also much better with a perpetual system than with a periodic one. With a perpetual system, updates are made in real time and can provide business owners with an up-to-date view of their inventory at any time.

4. Cost

Setting up a perpetual inventory system can be an expensive option but the benefits far outweigh the costs. With a real-time database, the accuracy of inventory management is improved and businesses save both time and money in the long run by minimizing lost sales due to stock shortages.

Also, with the integrated capabilities that come with technology like scanners, RFID tagging and automated replenishment, companies can stay in touch with consumer preferences and quickly adjust to meet changing needs.

5. Scalability

Scalability is one of the most desirable features of a perpetual inventory system. The ability to match the system's size and complexity to the needs of a business makes it extremely versatile.

Companies with large inventories, or those expecting to grow quickly, can use the same system but tailor it to meet their demands by simply increasing or decreasing its capacity.

Conversely, small businesses can also benefit from this technology, as they don't need to invest in a full-scale perpetual inventory system which may be excessive for their current requirements.

6. Flexibility

Finally, a perpetual inventory system is more flexible than a periodic system. Business owners can quickly adapt to changing needs and adjust stock levels accordingly.

Ultimately, there are many differences between the two types of inventory systems and it’s up to business owners to decide which one best suits their needs. While both have their advantages, it’s important to weigh the pros and cons for companies to optimize their operations and improve efficiency.

Benefits of a Periodic Inventory System

Now that you know the differences between periodic and perpetual inventory systems, it is important to consider the benefits of each. They include:

1. Low Cost

The cost of implementing a proper inventory management system can be intimidating, but there are options available. The periodic inventory system is an easy and affordable way to keep up with stock levels, ordering, and other related tasks.

With such a system in place, businesses gain more control in terms of tracking and reordering what is needed without having to break the budget. Furthermore, when it comes to tracking orders and sales, the records provided by a periodic inventory system are just as reliable as those produced by a more expensive perpetual option.

So if you need an effective but low-cost method for keeping your business's supplies organized and tracked, the periodic inventory system could be the perfect solution.

2. Flexibility

Flexibility is key when it comes to routine tasks around the house, like taking counts. When you can plan and decide when the counts will happen, it can take away some of the stress of having a constant reminder of it what needs to be done.

With some forethought and planning, these essential duties can be structured around busy family members or special events that are already planned for. By allowing for a degree of flexibility with these tasks, an individual can better adhere to their schedule and stick to their commitments - ensuring that everybody involved is fully accounted for!

3. Less Technical Knowledge Needed

Many businesses rely on sound inventory management to ensure their success, however, in the past, this often required a large amount of technical expertise and knowledge. With the development of periodic system technology, this is no longer necessary.

This type of system is easy to implement and can be used in any size business with little need for any extra knowledge or know-how. Companies using a periodic inventory system instead can manage their products using simpler methods meaning they avoid the complexity that usually comes with perpetual systems while still seeing an increase overall in efficiency and cost savings.

4. Less Risk of Human Error

Human error happens, and it can result in costly mistakes. Because of this, many businesses have adopted an inventory control system to keep track of their stock. However, manual physical counts are also a great way to observe how much is in each inventory item, as well as its quality.

These types of inventories are performing up-to-date manual counts with barcode scanning or other forms of ledger tracking methods which keep the risk of human error to a minimum.

Moreover, updating accounting reconciliations manually when performing physical counts help make sure there aren't any missed items. With physical counts, you have the benefit of accuracy while being cost-efficient – an attractive combination for businesses.

Benefits of a Perpetual Inventory System

Now that you know the differences between periodic and perpetual inventory systems, let's look at the benefits of a perpetual system. These include:

1. Accurate Stock Levels

Accurate stock levels are crucial for businesses to properly manage their merchandise and be prepared for customer demand. With a perpetual system, businesses can benefit from knowing exactly how much stock they have on hand at all times.

No longer do they need to keep a mental tally of what has come in or gone out. Instead, they are alerted immediately whenever items are being added or removed, allowing them to make more efficient decisions and deliver better customer service.

Such systems provide an invaluable service that helps businesses meet consumer needs in the ever-changing marketplace.

2. More Efficient Ordering

The ability to accurately track stock levels can drastically improve how companies order materials. Instead of relying on guesstimates, firms have a precise understanding of the number of items they need to order and when they need to be delivered.

This ultimately leads to them over- or under-ordering far less often and correctly timing their orders to make sure stock is arriving right on time. As a result, companies not only save money but can ensure that their customers have access to the products they need as soon as possible.

3. Increased Visibility

Increased visibility of data makes it much easier to identify potential issues with sales and ordering patterns. With a perpetual system, business owners can access up-to-date data at any time, allowing them to quickly evaluate patterns and make informed decisions on the right course of action.

In the age of digitalization, real-time monitoring is essential for companies that want to stay competitive and drive success. Perpetual systems provide an invaluable resource for businesses to have a better understanding of their operations, which then lets them develop strategies that can capitalize on strengths and address weaknesses as needed.

4. Easy Tracking of Inventory Movements

No one likes to be stuck playing guesswork games with limited information. With perpetual inventory tracking, businesses no longer have to do the detective work involved in figuring out the details of their stock's movements.

Instead, they can use the real-time data generated by this system to give them a sense of when items were shipped, who received them, and how many were sent. This way, inventory management is that much more precise and efficient so that businesses can stay on top of their operations as a result.

Periodic vs Perpetual Inventory System: Which One Should You Choose?

Both a periodic vs perpetual inventory systems have their own set of advantages and disadvantages. It's important to weigh these pros and cons carefully before deciding which system is right for your business. Ultimately, the best inventory system is the one that meets the specific needs of your company.



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