#Using a periodic inventory system update#

An alternate method to this is perpetual inventory management, wherein the company uses technologies and software to track the real-time update on inventory. It is also known as a physical inventory system where the inventory team takes the regular physical count of the inventory to determine if the quantity available with them is apt to meet the demand or not. To ensure that every process takes place seamlessly, a periodic inventory system can be beneficial. It eventually helps them make the right decision when it comes to restocking the inventory or placing the order, or selling the product. Companies keep track of their inventory to ensure that there is always sufficient stock available. Inventory management is a key component of any business that deals in manufacturing goods. Carefully evaluating these factors can help the business choose the right method of inventory management. The choice of inventory management method depends on the size of the business, the resources available, and the funds available with them. This can also lead to inaccuracies in the inventory report which can eventually impact the profitability of the organization. For example, manually keeping a check on the inventory level can lead to errors. While this method is easy to implement but it comes with certain limitations. This method is commonly used by small businesses or those with low inventory volumes as it requires less administrative work and may not require specialized software or equipment. To determine the cost of goods sold, periodic inventory requires a business to track the total purchases of inventory during the accounting period and subtract the ending inventory value from the total cost. This is done when the company needs to order more products, sell their products, and restock again. With this, a company can accurately measure the inventory level and make the right decision accordingly. This can be done monthly, weekly, or quarterly. Periodic inventory is an inventory valuation method that conducts the physical counting of inventory at a fixed interval. In this blog, we are going to unfold the details of periodic inventory systems and various key aspects associated with them, such as periodic vs perpetual inventory systems, examples, benefits, challenges, and more. Both these aspects are integral for a business. This is done weekly, monthly, or quarterly.Īlternatively, a perpetual inventory system provides real-time information on the inventory level. The periodic inventory system is an important method of inventory management, where the management takes the physical count of every inventory present with them.