How to Use a Perpetual Inventory System for Your Business?

How to Use a Perpetual Inventory System for Your Business?

When you are a small-scale business, managing inventory manually or with a basic application is a manageable task. However, as the business grows and the inventory gets complicated, you require a dedicated application that can simplify things for you, and that’s where the perpetual inventory system comes into the picture.

In this article, we’ll discuss everything you need to learn about the perpetual inventory system. Start with providing a basic understanding of the system to a detailed explanation of its working and use cases for businesses, we covered it all in this article.

Lastly, we have also explained NetSuite’s exclusive inventory management tool that can help your business achieve exponential business growth by seamlessly managing your inventory for you.

Let’s dive in.

What is Perpetual Inventory System?

A perpetual inventory system helps you provide a centralized database for your multiple inventories and delivers real-time insights into the inventory. Under a perpetual inventory system, the changes in inventory levels are recorded on a real-time basis. Such changes could be in the form of purchases, sales, stock adjustments, etc. Perpetual Inventory System eliminates the need to perform physical stock take to know the status of the inventory.

How Does the Perpetual Inventory System Work?

As we discussed before, the perpetual inventory system allows you to check real-time inventory data, which helps businesses make data-driven decisions.

But how does it actually work? Let’s check the critical aspects of its working.

Adding Inventory levels on the point-of-sale system

Your inventory is surely integrated with the POS (point-of-sale) system.  The sales should be reflected in the inventory whenever a product is sold through POS.

The seamless integration between POS and inventory management system will enable you to track inventories on a real-time basis.  

Update Cost of Goods Sold (CGS)

One of the critical uses of a perpetual inventory system is that it automatically updates the COGS. The cost of goods sold is reached by adding the costs incurred in bringing goods to the shop to the cost of purchase.  The cost of Goods Sold follows the concept of landed cost of goods. As soon as the purchase is made, COGS is recalculated.

First, in your income statement, the debit is recorded against your COGS, and then the same amount is recorded as credited to your inventory on your balance sheet.

Reorder Point Automation

This feature helps you to have optimum demand forecasting. The perpetual inventory system uses the sales history and learns about the patterns. According to those patterns, the Perpetual Inventory System automatically increases or decreases the recorder threshold level.

For instance, your business has experienced higher sales for certain products in July for the last two to three years. The perpetual inventory system will notice this and increase the reorder points automatically. Similarly, if the sales are low in October, the perpetual inventory system will reduce the reorder points.

So, even when the demand fluctuates, you can maintain the optimum inventory levels with this feature.

Purchase Order Automation

As per the reorder points created, the perpetual inventory system automatically creates the purchase order when the number of inventory items of a particular product goes below the threshold limit. It is sent directly to the supplier and, thus, saves your time in manual ordering.

Warehouse Management Software

After the purchase order is sent and you receive the goods, it’s time to add them to the inventory. You don’t need to manually enter the information about the items through a perpetual inventory system. It only requires a warehouse employee to scan all the items, and they will automatically get reflected in the perpetual inventory management application.

How to Use a Perpetual Inventory System for Your Business

Why Your Business Should Implement a Perpetual Inventory System?

The perpetual inventory system offers several benefits over other inventory systems, including the periodic inventory system. By implementing it, your business will have better knowledge of its inventory, and making improved decisions will become easier. Let’s check each benefit in detail.

Centralised Information for Multiple Locations

If you have stocks at multiple locations, then a perpetual inventory system solves the problem of managing all locations in one go. With a centralized database, it links all the local inventories and tracks them simultaneously. So, for every item, it shows the local as well as centralized number of items.

Real-time Inventory Information

Real-time inventory information means the perpetual inventory system reflects the changes on the screen as they happen. That means it will be immediately shown whenever an addition or purchase is made, and you won’t need to wait. This provides the ability to make immediate decisions based on real-time events.

In-depth Inventory Records

The perpetual inventory system provides a real-time view of the inventory, providing complete information about the movement of items in the inventory. It helps to have a complete view and look for issues such as which local inventory is not performing well, what items are not moving forward, etc.

Reduces Inventory Management Cost

One of the reasons for the high inventory cost is incorrect holding and procurement. As the perpetual inventory system provides real-time inventory status, it helps you better manage customer demand. Besides that, perpetual inventory management brings in automation, reducing resource costs. 

Seamlessly Integrate With Your Business

There are multiple applications that work on perpetual inventory systems. If you use other applications to manage other business processes, such as accounting, workflows, etc., you can integrate those with perpetual inventory systems. For this, we recommend NetSuite as it allows high-level customization and can be molded per your business’s nature and structure.

Easy Inventory Balance Calculation

You can calculate the inventory balance immediately as the perpetual inventory system shows real-time information. Therefore, by the end of the season or financial year, you’ll know the exact balance. It helps to understand when you should run a sale and bring in new stock.

Implement Automation with NetSuite’s Inventory Management Tool!

Make inventory management easier, save time and cost on resources!

NetSuite Inventory Management Tool

NetSuite offers one of the top inventory management tools that provides real-time insights into all your inventories existing at different locations. The tool is designed to keep the inventory levels optimum. Overall, the NetSuite Inventory Management Tool supports businesses in reducing inventory costs and improving revenue by ensuring that you never run out of products in demand.

NetSuite Inventory Management tool has the following benefits:

  • Demand-based planning
  • Ease to manage inventory
  • Decrease cost of goods sold (COGS)

Speaking of its primary features, NetSuite aims to minimize manual processes by automating inventory functions and giving top-notch insights to the business.

  • Inventory visibility for all locations
  • Dynamically maintains the preferred stock levels
  • Automated inventory count without stopping transactions
  • Track inventory items using lot and serial numbers
  • Comprehensive dashboard allowing you to look at different inventory aspects.

Revolutionize Your Inventory Management with NetSuite's Inventory Management Solution!

Streamline inventory operations, boost efficiency, and cut costs – start today!

Cloudiotech Perpetual Inventory System Services

If you think a perpetual inventory system is the go-to solution for your business, then you are at the right place. We, at Cloudiotech, have experience in setting up a perpetual inventory system for several businesses.

If you have any doubts regarding setting up a perpetual inventory system for your business, we can have a discussion. First, we will understand your business, check the inventory automation requirements and possibilities, and provide the costing.

We believe in keeping everything transparent and in a well-defined order. So, you’ll always be aware of every task we perform and how the progress is.

Ultimately, you’ll get a perpetual inventory system seamlessly integrated with all your business processes.


In this article, we learned what a perpetual inventory system is, how it is used, and what are its benefits. We also explained to you the factors to consider while selecting a perpetual inventory system.

Based on those factors, we recommended NetSuite’s inventory management tool. However, we could recommend you better by discussing your business requirements, nature, and size.

Overall, a perpetual inventory system is best for businesses that want:

  • Immediate insights and conduct analytics through them.
  • Implement automation to make inventory processes smooth.
  • Solve trouble related to inventory tracking.

If you want to learn more about how a perpetual inventory system can be useful for your business specifically, reach out. We will map your inventory with a perpetual inventory system and show the level of impact.

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