Pros And Cons Of Perpetual Inventory System

To maintain smooth operations, businesses should invest in some form of product monitoring, like a perpetual inventory system. By doing so, you’ll be able to assess the flow of your goods and services. Otherwise, failure to do so could lead to potential waste and trading losses. Ultimately, you can easily avoid this with the use of a system.

Depending on the size of your business, managers must decide whether a periodic inventory or a perpetual inventory system is better or not.

Nonetheless, a perpetual inventory system has several advantages over a periodic system for businesses of all sizes! In a business using a periodic inventory system, purchases are recorded throughout the year. However, the count or value will only update at the end of the year after you perform a physical count.

A perpetual inventory system updates the inventory in real-time when purchases are made or inventory is sold.

In this article, we will cover the pros and cons of a perpetual inventory system, as well as what you can start using it!

What Is A Perpetual Inventory System

Perpetual inventory is a method of accounting for inventory. The system instantly records inventory sales or purchases through a digital point-of-sale and business asset management software. For instance, a grocery store may use a continuous inventory system. Whenever a product is scanned and paid for, the system updates the inventory count in a database.

When using the perpetual inventory system, the POS system automatically changes the count of your list. In addition, you can access your inventory report anytime online, which will make it easier to manage or purchase inventory. However, continuous inventory systems are not completely correct at all times. Several factors can influence the accuracy of your business’s inventory levels. You can forget to record a transaction in your business or experience employee theft. 

Moreover, it’s worth occasionally checking your actual inventory quantity to compare totals. Calculations are usually done from time to time because you periodically wait until the end of an accounting period; just like the inventory list. Businesses that use POS systems and sell high-priced items (i.e. car dealerships) typically use this method to repeatedly count inventory.

Perpetual Inventory Vs Periodic Inventory

Traditionally, store managers had to manually handle inventory systems. They would take stock of goods at certain points in the production process. This is seen as a periodic inventory system. Now, the modern alternative to this method is the perpetual inventory system that is the continuous real-time monitoring of the flow of goods into and out of business.

While periodic is the cheapest process of inventions, working with one for a large business can be a challenging task. It is time-consuming and also requires dedicated human resources. In addition, even though a perpetual inventory system may be faster, it is, in some situations, more costly. Perpetual inventory works when you always use inventory; the POS system automatically changes the level of your list.

You can access your inventory report anytime online, which will make it easier to manage or purchase inventory. However, from time to time, the Periodic inventory system relies on physical inventory calculations to determine your finished inventory and the cost of goods sold. You update your accounts at the end of your accounting period. Your accounting period can be once a month, quarter, or year.

Pros Of A Perpetual Inventory System

The pros of the perpetual inventory system include providing real-time inventory surveillance, data management, and analytics. These are explained below.

Real-Time Inventory Surveillance

Perpetual inventory system records inventory updates and movements as they occur. This means you can enable inventory management to keep quick, easy record-keeping, make budgeting easier, avoid backorders.

Data Management & Analytics

A perpetual inventory management system plugs into a central gathering hub that can efficiently collect and interprets data from multiple sources. This makes it ideal to understand customer priority better, provide better customer service, and predict buying behavior.

Cons Of A Perpetual Inventory System

The cons of a perpetual inventory system include high startup costs, technical bugs, and fewer audits. Down below, you’ll find the explanation of these factors.

High Startup Cost

Setting up a perpetual invention system shows significantly higher costs when compared to a periodic system. This is because a perpetual system requires multiple special elements (RFID codes, scanners, computer software) that contribute to a high cost of setup. However, with the right partner, higher startup costs won’t always be the issue.

Technical Bugs

The likelihood of a system crash remains one of the main difficulties for every computerized system. A corrupted hard drive, power loss, and other technical problems can result in the loss of essential information.

Cybercriminals or hackers are continuously peeping for diverse ways to retrieve information about the company or customer. An inventory platform involving point-of-sale systems and accounting is a valuable resource. However, hackers can take advantage of this and search for important financial data; or even the personal data of suppliers or buyers. Nevertheless, you can still solve this problem by updating security systems and adding antivirus software.

Fewer Audits

A perpetual inventory has fewer audits than a periodic, making it more difficult to detect theft and less likely to detect scanning errors, more difficult to fix errors.

Inventory Management With A 3pl

3PL solves the problem of small eCommerce businesses keeping track of inventory. 3PL receives orders through an API linked to their customer’s website, providing 3PL warehousing, packing, and shipping services.

Having a perpetual inventory system is more ideal without a large upfront investment. So, 3PLs typically charge a small fee per order. Small and medium-sized businesses will benefit more from this; since they usually focus on growth.

Why Choose Print Bind Ship Instead Of Investing In Perpetual Inventory System

A 3PL, such as Print Bind Ship, can solve the problem of small eCommerce businesses tracking inventory. Print Bind Ship can receive orders through an API. In addition to order processing, Print Bind Ship can also provide; warehousing, packaging, and even shipping services.

Print Bind Ship is like having your professional warehousing team and a full team of eCommerce experts available to help businesses. Get in touch with Print Bind Ship today and take advantage of our free consultations here!