Perpetual Inventory System: Advantages and Disadvantages

• What is Perpetual Inventory Management?
• Why so many companies choose perpetual asset systems
• Advantages of ongoing inventory management
• Disadvantages of ongoing inventory management
• Avoiding the dreaded end-of-year stock taking
• Advantages of perpetual stock taking from a legal perspective
  
• Timly as an ideal solution in perpetual stock taking

What is perpetual inventory management?

An ongoing or perpetual inventory system is a digital transformation solution that lets you keep track of your assets – digital and physical – on an ongoing basis, as opposed to the more traditional but generally less useful or accurate approach of manually taking stock of inventory and assets on a yearly basis or at other regular intervals.

The best asset management software let you track not only the amount and changing levels of inventory, but also condition, value, status, use history and availability, physical location and much more. They should also be adaptable and scalable, provide flexible reporting options, and be easy to implement and to use – indeed, one of the great advantages of ongoing inventory management is that it becomes such a simple and natural part of daily activities.

Why are so many companies turning to perpetual asset systems?

While there is still a misconception that perpetual asset management platforms are too expensive, or too difficult to deploy, more and more companies large and small are realising that ongoing inventory management solutions are in fact affordable, easy to implement and easy to use – and make so many things so much easier down the road.

Advantages of ongoing inventory management

What are the pros and cons of perpetual asset management software?

This is difficult to answer for one single reason: it’s not easy to come up with real and substantial disadvantages of any company switching to automated ongoing inventory management solution.

The benefits of digital transformation through perpetual inventory management software are plentiful, including (among many others):

∗ The best, most accurate and up to date picture of current inventory and assets

∗ Improved decision making, strategising and implementation

∗ Increased productivity and decreases in workflow disruptions

∗ Better understanding and use of company assets

∗ Extended life of assets and increased reliability

∗ More accurate company valuation

∗ Better, easier and more flexible reporting

∗ Ensured compliance with statutory, regulatory and disclosure requirements

Disadvantages of ongoing inventory management

On the other hand, many of the assumed disadvantages of asset management solutions are just that – assumptions – and these points are either no longer true or never were:

Inventory management platforms are expensive. In fact, even the very best solutions are remarkably inexpensive, and will invariably provide a surprisingly fast ROI (return on investment)

Asset management software is difficult to use. Good cloud-based inventory apps will feature a simple and intuitive UI (user interface) that makes it easy to perform basic tasks as well as to access and utilise advanced functionality and customise the solution in powerful ways

Digital transformation, like asset management platforms, is difficult and disruptive to deploy. Our experience here at Timly is that companies are almost always amazed at not just how quickly and easily perpetual asset management can be implemented, but how many operations and processes are simplified and optimised

Avoiding the dreaded end-of-year stocktaking

One of the biggest advantages, and perhaps the most keenly felt (at least for your beleaguered staff), is the elimination of the annual taking of stock, since inventory levels are easily and naturally maintained on an ongoing basis.

A full taking of a company’s stock has traditionally been done on an annual basis – often at the end of the fiscal year, and as you undoubtedly know this yearly inventory process is often very stressful, difficult to schedule, manage and execute, and for many reasons can be inaccurate or incomplete.

Perpetual, or ongoing, inventory management, on the other hand, is on all counts exactly the opposite:

∗ There is little or no stress, since inventory accounting becomes a natural and automatic part of daily processes and workflows.

∗ The difficulties of scheduling and successfully executing annual stocktaking are eliminated, since the inventory is always accounted for and full reporting is easily accessible.

∗ Accuracy is ensured due to the comprehensive nature of the best inventory management platforms, as well as the constant tracking and continuous updating of inventory – including digital and physical company assets and saleable goods.

Advantages of perpetual stock taking from a legal perspective 

UK legislation requires companies to provide accurate and up to date accounting of their assets and inventories – a ‘true and fair view’ – as outlined in the Companies Act 2006, which covers your company’s obligations around stockcounting, internal control and disclosure.

This legislation does not specify when or how taking stock should occur, which allows you some flexibility in choosing between traditional methods and digital transformation, assured that either way you are in compliance with the relevant statutes.

That said, we should emphasise that perpetual stock taking using asset management solutions may in fact increase your compliance, for the following reasons:

∗ You will have a more accurate and up to date inventory, and avoid the often inevitable mistakes and inaccuracies of taking stock on a yearly basis.

∗  Comprehensive and flexible reporting functionality can ensure full compliance in reporting and disclosure, and can even keep you on schedule.

∗ Questions of what needs to be accounted for, and what does not, are eliminated, because holistic inventory management platforms allow for easy tracking of all physical and digital assets.

Please note that this article is not intended to provide legal guidance, and the information provided may be inaccurate ,out of date or inapplicable. Please consult a qualified accounting or legal expert to ensure your company’s compliance with all statutes and other internal and external regulations.