Advantages of Perpetual Inventory: The Benefits of a Modern Inventory System

Business owner conduct perpetual inventory count in the warehouse

Running your inventory well is one of the most important – and difficult – roles of being a business owner or manager.

Keeping your retail inventory management in order means that your shelves are stocked, your warehouse/storage areas aren’t cluttered, your cash flow remains stable, and your vendors are happy. Operationally, it’s impossible to run a successful small business without proper inventory control methods.

Still, nearly half of small businesses don’t do any inventory tracking at all. Luckily, there are ways to improve your product management. But how exactly can you best manage your inventory? Besides needing a powerful POS system, there are some more specific ways businesses can improve their operations. A perpetual inventory counting system is one of them. Let’s look at the advantages of perpetual inventory and how it differs from other systems.

What Is Perpetual Inventory Counting?

This might also be referred to as a continuous inventory system. Using a retail point of sale in conjunction with scanners or RFID chips, this inventory system tracks all received, stocked, and sold inventory in real-time. 

Your accounting and sales reporting will be automatically updated every time an item is scanned into your stock, added to your shelves, or purchased by a shopper, whether it’s in your brick-and-mortar or eCommerce store.

Importantly, the data is kept in a single space. With such consolidation, retailers are able to organize their systems and optimize ordering, shelving, pricing, promotions, and more.

an infographic showing the differences between perpetual and periodic inventory

How Is Perpetual Inventory Different Than Other Inventory Management Systems?

Traditionally, retailers have used periodic inventory counting. Of course, prior to the advent of modern POS machines, powerful cloud-based software, and vast integrations, perpetual counting wasn’t possible. But even with these innovations, many retail businesses, particularly small businesses, are still using periodic counting.

Periodic inventory management is rather self-explanatory. Unlike perpetual counting, this system only tracks a particular inventory status intermittently through physical counts

The time period between counts can vary, depending on industry and ambition. Due to the time commitment of the process, this time frame often exceeds recommendations. Most commonly, businesses perform manual counts, monthly or quarterly.

While it’s possible to link periodic inventory to your POS system, the initial counts are usually taken with pen and paper or entered into a spreadsheet and exported. Not only is this more time-consuming, but it also results in a much greater rate of human error.

Are There Any Advantages of Periodic Inventory?

While this system, as we mentioned above, involves vast time commitments and leaves too much room for error, there are still some advantages. And they’re worth considering for certain business types.

It’s cheaper

If you’re a new small business and have a limited budget, getting a periodic inventory system up and running will be more affordable initially. Remember, though, that the long-term costs of less efficiency and accuracy will add up.

It’s easy

Periodic counts don’t require learning more than how to use a basic spreadsheet. While modern inventory systems are built to be intuitive and have progressed in improving user interfaces, there will still be a learning curve.

It’s not complicated

Likewise, periodic inventory doesn’t incorporate a lot of data. It only needs to account for the orders, inventory on hand, and the total inventory sold. This makes it a simple system to implement.

So What Are the Advantages of Perpetual Inventory?

As we’ve hopefully established at this point, perpetual inventory is recommended for most businesses. While some small start-up retailers might consider holding off on upgrading their inventory management, the vast majority of businesses will see an immediate impact after implementing a modern, real-time perpetual counting inventory system.

  • Be proactive
  • Run multi-location operations
  • Keep it centralized
  • Stay informed
  • Reduce storage space
  • Identify theft
  • Increase cash flow

1. It allows for pro-action

Real-time inventory tracking shows you exactly the status of your products at any given time. And with a cloud-based solution, this means that you can also access such data remotely. You can make important decisions anytime, anywhere.

2. It’s great for multi-location retailers

Likewise, cloud, real-time data makes managing multi-store operations much easier. It’s impossible for you to be two places at once, but you can get a lot closer to doing so with this system. It allows you to make changes, place orders, change stock par levels, and a lot more, no matter where you’re at.

3. It’s centralized

Additionally, perpetual inventory keeps all product data in a single system between all brick and mortar stores and your eCommerce side of business. It’s impossible to monitor the inventory of all of your stores independently. Setting automatic stock notifications, reordering levels, par levels, vendor relations, and more through perpetual inventory streamlines business operations.

4. It’s more informative

Perpetual inventory counting gives businesses more actionable and impactful advice. Combined with powerful POS sales metrics, this system provides more data. This allows you to forecast trends and optimize your entire supply chain and marketing strategies.

5. It reduces storage space

With more efficient ordering and predictable analytics you’re able to reduce storage or warehouse space. Instead of having to always err on the safe side and over-order, retailers can be confident in ordering the right amount each time.

6. It helps identify theft or other shrinkage

With real-time counting, you’ll know immediately if there have been instances of theft, fraud, incorrect deliveries, or any other discrepancies. These can be remarkably costly to businesses and must be addressed quickly.

7. It increases your cash flow

With better inventory comes better ordering. And with better ordering comes better cash management. Keeping your ordering just right means that you’ll have cash on hand for unforeseen problems.

8. It offers immediate feedback

Being able to see the changes in real-time gives you feedback on promotions, multi-store discounts, new product lines, sizing/color options, or other general customer preferences. Having this immediate feedback means you can optimize your products and pricing quickly and maximize your revenue.

Perpetual Inventory Management with the Right POS System

KORONA POS offers businesses a modern inventory management system that includes perpetual inventory counting. With custom par levels, stock notifications, automated ordering, vendor relations, product analysis, and more, small businesses get valuable software that streamlines operations and optimizes ordering and pricing.

Business owners can try out KORONA POS for free with no commitments. A dedicated account manager will transfer your product information into your account and walk you through each of KORONA’s many features. Click below to get one set up today!

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Written By

Michael Chalberg

Michael has long focused his writing on the world of retail and small businesses. He''s been a part of the KORONA POS team since 2018 and loves helping entrepreneurs find ways to adapt and succeed. In his spare time, you'll likely find him hiking somewhere in the Southwest.