Permanent inventories: real-time stock control

Perpetual inventory is an accounting method used by companies to keep a continuous and updated record of their merchandise or product inventories. In perpetual inventory, companies maintain constant tracking of inventory entries and exits in real time.

In this inventory, each time merchandise or products are purchased, the entry is immediately recorded in the inventory, along with its cost. Similarly, when merchandise is sold, inventory exits and the cost of goods sold are recorded. This allows companies to have an updated view of their inventory levels and associated costs at all times.

The use of a perpetual inventory system can provide several benefits, such as better inventory management, the ability to more accurately identify the cost of goods sold, and the ability to make informed decisions about restocking and inventory control.
However, it may also require more detailed tracking and a more sophisticated accounting system to maintain updated records.

How do you achieve a perpetual inventory system?

Unlike periodic systems, where a physical inventory count is performed at specific times, a perpetual inventory system maintains a continuous and updated record of the quantities of products in stock. Here's how to achieve a perpetual inventory within a company:

1. Inventory management software: Use software specialized in inventory management. There are many options available in the market that allow you to record product entries and exits, inventory adjustments, and maintain an updated record.
2. Barcodes and scanners: Assign unique barcodes to each product. Use barcode scanners to record entry and exit transactions efficiently and accurately.
3. Integrated point of sale (POS): If you have a retail business, integrate your point of sale system with the inventory management software. This way, sales made will be automatically updated in the inventory.
4. Real-time updates: Whenever a sale, purchase, or inventory adjustment is made, make sure this data is entered into the inventory system immediately to maintain accuracy.
5. Periodic reconciliation: Although perpetual inventory reduces the need for full physical counts, it is important to perform periodic reconciliations between system records and physical inventory to verify accuracy.
6. Quality control: Implement a quality control system to ensure that damaged or defective products are removed from inventory appropriately.
7. Staff training: Make sure your team is trained to use the inventory system and record transactions correctly. This is essential for maintaining accuracy.
8. Regular audits: Conduct internal audits periodically to evaluate the accuracy and integrity of your inventory records.
9. Security and restricted access: Limit access to the inventory system to authorized personnel to prevent errors and unauthorized manipulation.
10. Analysis and optimization: Use inventory data to analyze demand trends, stock levels, and turnover rates. This will help you make informed decisions about purchases, promotions, and inventory management strategies.
    A perpetual inventory system requires investment in software, hardware, and training, but it can significantly increase the accuracy of your records and optimize inventory management in your company.

Where is perpetual inventory applied?

Perpetual inventory, also known as continuous or perpetual inventory, is an inventory tracking and control method used in accounting.

In this method, merchandise inventories are recorded constantly and in real time, as they are bought and sold.
It is used in a variety of industries and sectors, including retail, manufacturing, and distribution.
It is applied in situations where it is important to have an accurate and updated record of available inventories at all times. Some of the advantages of using perpetual inventory include:

Accuracy in control

It allows companies to have an exact tracking of available inventories, which helps to avoid problems of stockouts or excess inventory.

Efficient management

It facilitates better management of the supply chain and production planning, as companies can make informed decisions based on current inventory levels.

Reduction of losses

It helps to identify and prevent theft, losses, and damage to inventory, as any discrepancy between theoretical and actual stock is detected early.

Financial information

It provides updated information for the preparation of financial statements and sales cost calculations, which is especially important for strategic decision-making and to meet accounting requirements.

Improved decision-making

With updated information on inventory, companies can make more informed decisions about purchases, sales, promotions, and other aspects related to inventory management.

Perpetual inventory is applied in companies that need continuous control and tracking of their inventory to maintain an efficient and accurate operation, as well as to make strategic decisions based on updated information.

Where is perpetual inventory applied?

Perpetual inventory is especially useful for companies that handle a high volume of sales and stock, as it provides an accurate and up-to-date view of inventory, facilitating informed decisions about restocking, promotions, and financial planning.

This inventory method is highly beneficial for maintaining precise control of inventory and reducing the risk of losses due to obsolescence or theft. However, it also implies a greater investment in technology and resources to implement and maintain the tracking system.

Perpetual inventory is performed continuously over time and is particularly suitable for companies that require constant and updated monitoring of their inventory to optimize their operations and make strategic decisions based on accurate data.

Advantages of using a perpetual inventory system

The use of a perpetual inventory system offers several significant advantages for companies. Firstly, this system provides exhaustive and real-time control over inventory levels. With the ability to constantly track the entries and exits of products, companies can maintain an accurate knowledge of the exact quantity of each item in stock.

This allows for more effective planning of production and replenishment, avoiding problems of shortages or excess inventory. In addition, the perpetual inventory system facilitates the early detection of potential losses due to theft, deterioration, or obsolescence, allowing corrective measures to be taken promptly and minimize the impact on the company's finances.
Another key advantage is the improvement in decision-making and financial planning. Having updated information on inventory levels, companies can adjust their purchasing and production strategies according to the actual market demand.

This reduces the costs associated with storing and maintaining excessive inventory. Furthermore, a perpetual inventory system facilitates the accurate assessment of sales costs and profit margins, resulting in more precise and efficient financial management.

Overall, these advantages allow companies to optimize their operations, reduce unnecessary costs, and provide better service to customers by having products available when needed.

Is your company obligated to work with a perpetual inventory system?

Some companies may be obligated by specific laws or regulations to keep a detailed and accurate record of their inventory, while others may have more flexibility in choosing the inventory system they wish to use.
In general, a perpetual inventory system can be beneficial for companies, as it provides a clearer view of their inventory levels and can help prevent problems such as excess stock or lack of products in stock.
However, it also requires constant management and meticulous tracking, which can be more laborious compared to other inventory tracking methods, such as a periodic inventory system.

If you have specific questions about a company's inventory obligations in your area or industry, we recommend consulting with an expert in the implementation of permanent inventory management software by contacting Xamai to resolve your doubts.

What SAP inventory management software is recommended for a perpetual inventory system?

For a perpetual inventory system, SAP offers several inventory management software solutions that may be suitable, depending on the needs and size of your company. Some of the SAP solutions that could be recommended are:

1. SAP Inventory Manager:
This solution provides advanced features for inventory management, allowing for real-time tracking of inventory levels, replenishment planning, and supply chain optimization.

2. SAP Integrated Business Planning (IBP):
IBP is a broader solution that covers the entire supply chain planning, including inventory management. It may be a good option if you are looking for a more comprehensive solution that covers aspects beyond inventory management.

3. SAP Extended Warehouse Management (EWM):
If your company handles a complex warehouse and needs advanced inventory management in the context of the supply chain, EWM could be a suitable option. It provides advanced capabilities for warehouse and inventory management.

4. SAP Business One:
If you have a small or medium-sized business, SAP Business One may be a suitable option. It offers inventory management functionalities and other business aspects on a single platform.

5. SAP S/4HANA:
This is SAP's central enterprise suite. It offers modules for various business functions, including inventory management. You can opt for specific modules that adapt to your needs.

6. SAP Ariba:
If you are looking for a solution that focuses on procurement and supply management, SAP Ariba may be an option to consider. It helps manage procurement processes and, therefore, can influence inventory management.

It is important to consider your specific needs, the size of your company, the complexity of your operations, and your budget when selecting the most suitable SAP solution for your perpetual inventory system. 

We recommend that you contact SAP sales representatives or consultants specializing in SAP from Xamai to obtain a more personalized recommendation based on your situation.