The Perpetual Inventory: Advantages and Disadvantages for Your Company
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Inventory-intensive companies can benefit from perpetual inventory – but how?
The term onerous duty hardly fits a task as well as that of stocktaking. Many companies and merchants are obliged to take an annual inventory as part of their annual financial statement. In addition to account balances and debts, a company’s tangible assets must also be determined. The values determined flow into the company’s balance sheet.
The enormous task of stocktaking leads to disruptions in the business operations of many companies. Often a large part of the company’s own staff has to be involved or the inventory can only be carried out by external staff. For some companies, perpetual inventory advantages can be a useful alternative. This makes it possible to keep one’s own stocks constantly up to date throughout the year, so that they do not have to be determined on a specific date.
However, the permanent inventory is bound to strict requirements. Inventory software such as Timly is helpful in implementing this.
Are There Any Legal Requirements for Perpetual Asset Management?
There is an obligation to carry out an inventory. It is stipulated that companies and merchants must carry out annual financial statements from a certain annual turnover sum. All values of the company must be recorded. The inventory as of the balance sheet date is widespread. This is carried out at a fixed point in time at the end of the accounting year. All tangible assets of the enterprise are recorded and booked at this point in time.
The problem is that this point in time can collide with orders to be fulfilled or customer demand. For this reason, the HGB also permits a permanent inventory. However, this does not only offer advantages, it is also bound to certain conditions: The stock must be entered once in a stock ledger. Additions and disposals must be documented continuously thereafter. In addition, a physical inventory must still be carried out once a year. Here, the actual stock must be manually compared with the stock book. However, this day may be chosen freely.
Those responsible for a company can, for example, schedule it for times when there are fewer orders or carry out the physical inventory during ongoing operations. The perpetual inventory may not be used for items that have uncontrollable losses due to evaporation, for example. The same applies to particularly valuable assets that are stored in stock.
In order to experience all perpetual inventory advantages in terms of timing, it must be as easy to handle as possible. Therefore, specialised inventory software is the best choice. Only with this, for example, can a true multi-user capability with a central storage location, such as in the cloud, be represented. In everyday life, different employees can use it to permanently book entries and exits.
Perpetual Inventory and Annual Inventory – Advantages & Disadvantages
Of course, it depends on the circumstances which variant is more suitable for a company. We have summarised some possible arguments for you once again:
Annual inventory
Advantages:
One-off, concentrated action at a fixed point in time
Expenditure in the rest of the year not applicable
Support from temporary staff possible
Physical inventory is necessary once a year anyway
Disadvantages:
Normal business operations may not be possible
Shortages are not noticed for a relatively long time
High effort in a short period of time, possibly under time pressure
Stressed and unmotivated employees
Perpetual inventory
Advantages:
Physical inventory can take place during low order periods or in parallel with business operations
Permanent overview of the actual stock
Workload distributed in terms of time and personnel
Another advantage of the perpetual inventory: it can be carried out when stocks are lowest
Disadvantages:
Increased effort due to keeping a stock book and obligation to take physical inventory
If possible, access to the stock ledger must be possible by several employees during operation.
Stock record book must be kept securely
Asset Management Software in Use by Our Customers
The Timly software is continuously evolving to meet the needs of our customers. In various success stories, we show you how Timly optimizes processes in companies, thereby saving significant effort. With Timly, inventory management becomes child’s play.
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The Asset App as a Tool for Physical Inventory
Printed stock books, lists and also Excel tables are not really well suited to working on them with a large number of employees. It is better if you can act here with mobile devices. Particularly obvious is the use of smartphones and tablets, devices that are present in most companies anyway. Inventory software often offers an optimised app for this. This can be installed by employees on their business or private smartphone. It is also possible to assign the necessary rights for access to the data stock.
The camera of the mobile device functions as a barcode scanner. Some perpetual inventory advantages are as follows: Inventory software identifies the managed assets via QR codes, which can be attached to IT inventory items of all kinds as a space-saving sticker. Thereafter, each record can be accessed simply by scanning the QR code. If this is done in inventory mode, this process is already sufficient to record and check off the item. This is equally time-saving and less error-prone.
You do not have to worry about the connection to the network. An internet connection is sufficient. This simplifies stocktaking outdoors or in warehouses and production facilities where there is not necessarily a connection to your own network. The cloud connection offers advantages especially for permanent inventory.
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Daily Inventory With Asset Management Software
Especially in areas with a high turnover of own employees, regular use of an external employee or public traffic, a daily inventory can offer additional protection and a permanent inventory can have advantages, such as avoiding uncontrollable departures.
Items of any kind are recorded in the inventory software when they are taken over into the company’s stock and marked with a QR code.
You can carry out the permanent inventory efficiently without additional equipment – with inventory software
Profiles can be created for different assets. Afterwards, it is possible at any time to list the inventory individually according to day type and quantity. If you integrate the inventory into work processes, for example at the beginning or end of working hours, you not only have advantages for the permanent inventory, but also the benefit of a permanent update of the current stocks.
Transfers and handovers, which are often necessary for tools, for example, can be documented in real time by the employees. In this way, it is also possible to record loans, for example. Integrated locating functions are helpful in finding inventory, with which the last known whereabouts can be called up. This form of physical inventory avoids longer undiscovered shortages and lengthy searches of inventory that cannot be found.
Permanent Inventory for Optimisation – It Depends on the Right Tools
You not only have perpetual inventory advantages through a management system. Having a constantly up-to-date overview of your own inventory recording with real time updates increases the professionalism of a company. To manage inventories especially with a software-based management enables simple queries according to certain criteria at the push of a button. This database also fulfils the requirements for a digital stock ledger, as required for permanent inventory.
The disadvantages of perpetual and periodic inventory are particularly noticeable when handling involves a disproportionate amount of effort. Only if this can be done intuitively and without disrupting the usual operating processes does this simplification of stocktaking have its desired effect and advantages arise from perpetual inventory.
In contrast to the annual inventory, the physical inventory can be carried out if it fits the employees’ own activity planning. If the right conditions are created, the advantages of perpetual inventory outweigh the disadvantages. It can then be carried out almost automatically as part of your own inventory management.
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