The Periodic Inventory System: The Disadvantages and Advantages
You probably did not have a formal way of handling business when you first began.But as the company expanded, you realized that you could not leave company data stuck in your head.If you want to grow on into the future, then you have to move on to the next level.You must create a formal system.
You have to get an inventory system and determine the type.Will you settle upon perpetual or periodic?Quite naturally, each one will have both good and bad features.The real difference between the two is how they are updated.The perpetual inventory system has information that is updated constantly.But, the periodic inventory system is not updated until there is a new physical count done.But, this article will talk about the periodic inventory system.
The periodic system is only updated per a specific interval of time.Normally, this is around inventory time.Companies manually count their inventory on a weekly, monthly, bi-yearly or even yearly basis.Info is not updated on the books.The records are not reflected when product is delivered, shipped or received.This may be one of the bad things, but there are plenty of owners that are fine with this logic.
With the periodic system, you don't have to purchase a pricey inventory management software package.This is because information is not updated when product is ordered, received or shipped.Sales are made and orders are placed, but your records will not reflect this until the inventory count.This could be a month or even year later.
A small company might find this beneficial.But for a company that is active, this might not work.You will need a full fledge system that is capable of keeping track of your inventory in real time.
One of the best things is that you will not have to spend money on an inventory management software system in the very beginning. You could just use an excel spreadsheet.You don't have to keep feeding info to a system.
However, there are also disadvantages to having this kind of inventory.First, the inventory is never accurate.Tracking inventory is hard.The system is only updated the time of inventory.This can become very stressful if you have a large company that has a lot of business transactions.
Simply put, it is good to have an inventory system.But, only you can decide which one is suitable for your company.
You have to get an inventory system and determine the type.Will you settle upon perpetual or periodic?Quite naturally, each one will have both good and bad features.The real difference between the two is how they are updated.The perpetual inventory system has information that is updated constantly.But, the periodic inventory system is not updated until there is a new physical count done.But, this article will talk about the periodic inventory system.
The periodic system is only updated per a specific interval of time.Normally, this is around inventory time.Companies manually count their inventory on a weekly, monthly, bi-yearly or even yearly basis.Info is not updated on the books.The records are not reflected when product is delivered, shipped or received.This may be one of the bad things, but there are plenty of owners that are fine with this logic.
With the periodic system, you don't have to purchase a pricey inventory management software package.This is because information is not updated when product is ordered, received or shipped.Sales are made and orders are placed, but your records will not reflect this until the inventory count.This could be a month or even year later.
A small company might find this beneficial.But for a company that is active, this might not work.You will need a full fledge system that is capable of keeping track of your inventory in real time.
One of the best things is that you will not have to spend money on an inventory management software system in the very beginning. You could just use an excel spreadsheet.You don't have to keep feeding info to a system.
However, there are also disadvantages to having this kind of inventory.First, the inventory is never accurate.Tracking inventory is hard.The system is only updated the time of inventory.This can become very stressful if you have a large company that has a lot of business transactions.
Simply put, it is good to have an inventory system.But, only you can decide which one is suitable for your company.
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