Inventory records and systems
Inventory systems allow you to keep track of and make sure your inventory records are up-to-date. There are two main types of inventory systems that you can choose for your business; either a periodic or perpetual inventory system.
Periodic inventory systems
In a periodic inventory system, you don’t update your inventory records straight after your inventory levels change. Instead, you update them time-to-time by physically counting your inventory by doing a stocktake.
Advantages of periodic inventory systems include:
- being less costly to set up than a perpetual inventory system
- less reliance on electricity than a perpetual inventory system
- sometimes being cheaper to run.
Perpetual inventory systems
In a perpetual inventory system, you update your inventory records straight away after your inventory levels change. Perpetual inventory systems are often electronic and use a point-of-sale system.
Some benefits of perpetual inventory systems are:
- better detection of theft
- more up-to-date records.
Inventory records are records of what inventory your business has and how much it’s worth. It’s a good idea to update inventory records when your inventory changes, such as when:
- inventory goes obsolete, such as throwing out a movie ticket because the tickets are for a movie that is no longer in cinemas
- inventory has been lost or stolen
- inventory has perished, such as milk that went out-of-date
- the value of inventory has changed, such as the resale value of a diamond ring going down
- you buy new inventory from a supplier
- you sell inventory to a customer.
What to do...
- Read Set up record keeping and accounting systems to learn more about record keeping.