What is the purpose of a perpetual inventory system?

The purpose of a perpetual inventory system is to maintain a continuous and up-to-date record of inventory on hand. This approach allows businesses to track inventory levels in real-time, facilitating accurate management of stock and streamlined operations. With a perpetual inventory system, every transaction—both sales and purchases—updates the inventory records instantaneously. This immediate updating helps businesses ensure they have adequate stock to meet customer demand, reduces the chances of overstocking or stockouts, and aids in making informed purchasing decisions.

Moreover, having a real-time account of merchandise not only enhances inventory management efficiency but also assists in various operational areas, such as budgeting and financial forecasting. This system contrasts with periodic inventory systems, where inventory levels are only updated at certain intervals, which can lead to discrepancies and less effective management.