What is perpetual stock management?
Definition: Perpetual stock management implies that a business keeps real-time information on their stock levels and tracks their stock on an item-by-item basis (i.e. by using barcodes and point-of-sale scanners).
Stock management method
Perpetual stock management involves recording the sale or purchase of a company’s stock in real-time, usually through the use of computerized point-of-sale or asset management systems.
Perpetual stock management provides a very detailed account of any changes in stock levels and real-time reporting of the amount of stock on hand, therefore very accurately displaying the level of goods on hand.
Advantages vs. disadvantages
There are two specific benefits of using a perpetual stock management system:
1. It gives a company the opportunity of seeing exactly how much stock they have on hand at any given time. This makes it easier to track and e.g. know when to reorder certain stock.
2. It makes a company’s financial statements more accurate. By enabling very accurate recordkeeping as to the Cost of Goods Sold and stock on hand over a given period, it makes financial statements more precise at any moment in time.
While the benefits of enlisting a pertpetual stock management system are great, its primary disadvantage is the very high cost of implementation.