The Periodic Inventory System: The Disadvantages and Advantages
You probably did not have a formal way of handling business when you first began.However, as the company grew you knew that you could no longer walk around with business information in your head.If you want to grow on into the future, then you have to move on to the next level.If you want to have a successful company that continues to grow on a yearly basis, then you must set these things in place.
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.
Periodic inventory is only updated after a certain amount of time.This takes place during the interval of time when inventory is counted.Companies manually count their inventory on a weekly, monthly, bi-yearly or even yearly basis.This means that in terms of the books, the information is not regularly updated.Information is not updated when product is ordered, received or shipped.Although this is a definite con of using a periodic system, it is something that many first time business owners are willing to endure.
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 smaller company might like this.But, if you have been in business for a while, then this system might not be for your company.You will need a full fledge system that is capable of keeping track of your inventory in real time.
Quite naturally the biggest benefit is that you won't have expensive upfront costs for an inventory management software system. You might be able to get away with using only an excel spreadsheet.You will not be required to feed information into a database.
But, there are also cons.The main one is that you will never have an accurate inventory count.It will be hard to track inventory when sales are made.The system is only updated the time of inventory.If the company has a lot of activitiy, this can be irritating.
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.
Periodic inventory is only updated after a certain amount of time.This takes place during the interval of time when inventory is counted.Companies manually count their inventory on a weekly, monthly, bi-yearly or even yearly basis.This means that in terms of the books, the information is not regularly updated.Information is not updated when product is ordered, received or shipped.Although this is a definite con of using a periodic system, it is something that many first time business owners are willing to endure.
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 smaller company might like this.But, if you have been in business for a while, then this system might not be for your company.You will need a full fledge system that is capable of keeping track of your inventory in real time.
Quite naturally the biggest benefit is that you won't have expensive upfront costs for an inventory management software system. You might be able to get away with using only an excel spreadsheet.You will not be required to feed information into a database.
But, there are also cons.The main one is that you will never have an accurate inventory count.It will be hard to track inventory when sales are made.The system is only updated the time of inventory.If the company has a lot of activitiy, this can be irritating.
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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