There are two types of inventory procedures, perpetual and periodic, which are used to keep track of a company’s stock. Perpetual procedures use point-of-sale scanning equipment to record transactions in real-time, while periodic procedures involve physical counts at regular intervals. Both procedures are important for managing inventory and determining competitive selling prices.
There are two basic types of inventory procedures – perpetual and periodic – used to keep track of the actual amount of products a company has on hand. Choosing a procedure that works for a specific business is essential, as it accounts for the stock of all the products it may sell. This can be one of the biggest expenses for a business and one of the most difficult to manage.
Accurate and up-to-date inventory information is needed to determine the competitive selling price of products, as well as to schedule the purchase or production of new products to replace those already sold. Two basic types of procedures can be vital in managing this.
Perpetual-type inventory procedures typically utilize point-of-sale scanning equipment that enables a business to record transactions in real time. Procedures of this type generally provide a highly detailed record of each sale as it occurs. This procedure is capable of tracking thousands of transactions in a single business day. While perpetual probate procedures usually require a larger upfront investment, the increased efficiency it provides can often lead to greater profits.
The up-to-date data that perpetual inventory procedures provide allow managers to monitor product supply levels and order additional stock as needed. It can also help retail businesses determine which products are selling well and which items need to be moved by offering a reduced price or sale. A company using this procedure should also perform a periodic physical count of its products to reveal losses due to theft.
Periodic type inventory procedures usually involve some type of complete physical count of products available at regular intervals, which could be monthly, quarterly or yearly. In this type of procedure, the total number of products a company has in its inventory is physically counted at the end of each accounting period. Any products purchased during the subsequent period are added to this total. Another count is taken at the end of each subsequent period and deducted from the final total of the previous period.
The volume of products a company sells annually typically determines the frequency of these periodic inventory procedures. Because this type of inventory can be a time- and resource-consuming event, many companies hire inventory services to provide the manpower and automation needed to count inventory and reduce downtime. Inventory control software is also available to help speed up the process.
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