how to use a perpetual inventory system
to calculate inventory companies need to set up a system where every piece of inventory is entered into the system and deducted from the system as it s sold this requires the use of point of sale terminals barcode scanners and perpetual inventory software to update estimated inventory with every product purchase and sale 2since a perpetual inventory system estimates stock on hand it does not replace a periodic physical inventory at some point a physical inventory should take place businesses that use a perpetual inventory system typically employ cycle counting or the process of physically counting a portion of inventory to use as a baseline to check the accuracy of the perpetual system the intent is to complete a full physical inventory over time 4inventory management refers to the processes involved in ordering raw materials storing and using them to create products and ultimately selling products to an end user there are four main inventory management methods each of these methods has its pros and cons when it comes to use within a perpetual inventory system the use of a perpetual inventory system makes it particularly easy for a company to use the economic order quantity eoq method to purchase inventory eoq is a formula that managers use to decide when to purchase inventory based on the cost to hold inventory as well as the firm s cost to order inventory 