Perpetual vs Periodic Inventory, With a Record Format

A perpetual inventory system updates your stock records with every movement: each delivery, batch, sale and write-off changes the balance as it happens, so you always know what should be on the shelf and what it's worth. A periodic system doesn't track movements; you count everything at the end of each period and work out what was used from opening stock plus purchases minus closing stock. Periodic is simpler to run and tells you less; perpetual takes a record of every movement and tells you what's on hand any day, what each batch cost, and what went missing. Below are the two side by side, a perpetual record format worked through, and which one fits a small maker.

The short version

• Perpetual: every movement updates the balance. You know stock and cost every day.
• Periodic: count at period end; work out what was used from the counts and purchases.
• Periodic can't tell waste or theft from use: the difference becomes "used".
• Perpetual still needs counts, to check the records against the shelf.
• A perpetual record runs: date, in, out, balance, value, average cost.
• Makers with recipes, lots or more than one place usually need perpetual.
• TaroStack is a perpetual system that records the movements for you. More below.

Side by side

The periodic formula is the one in plenty of small business books: opening stock + purchases − closing stock = cost of goods used. It's honest, and it's blind: if 7 lb of flour went on the floor, periodic records it as 7 lb used.

A perpetual record, worked through

A perpetual record for one item is often called a stock card. Here's Windward Roots' bread flour for a week, at moving average cost (Windward Roots is the made-up taro business I use in these examples):

Each out is costed at the average right before it, and the average changes only when stock comes in. On Sunday the count finds 158 lb against the record's 165, and that 7 lb difference is something periodic would never show. How to keep a record like this every day, for every item, is in how to keep track of inventory.

The same week, periodic

Opening count     150 lb    $168.00
+ Purchases       200 lb    $230.00
− Closing count   158 lb    $179.67  (at $1.1372)
= Used            192 lb    $218.33

Periodic says 192 lb was used. Perpetual says 180 lb went into bread, 5 lb was written off, and 7 lb is unexplained. Same flour, a different story. The journal entries for each method are in cost of goods sold journal entry.

Get the stock card

Download the perpetual inventory stock card. It has the format above with the formulas built in: type each movement in or out, and the balance, value and moving average run down the page. Copy the sheet for each item. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Which fits a small maker

Periodic is fine for a business that buys and resells a small range and has one person handling it. A maker usually needs perpetual, for three reasons: recipes, because every batch uses many ingredients and you want each batch's cost; lots and dates, because a count can't tell you which lot went where; and more than one place, because the market stall's stock needs its own balance. The catch is that perpetual by hand means a stock card for every item, updated with every movement, and that's where spreadsheets give up. Whatever you choose, count regularly: perpetual records drift without counts to check them. Counting is covered in how to count inventory.

Where this stops working

A stock card per item is a lot of cards. Forty ingredients, packaging and products, a delivery most days, batches using six ingredients each: keeping every card current by hand means dozens of entries a day, in the right units, at the right cost. The cards fall behind within a week, and the business slides back to periodic without deciding to.

How TaroStack does it

TaroStack is a perpetual system that keeps every stock card for you, from the movements you're already making.

Every movement updates the balance. Receiving a delivery adds it at the price you paid, with freight spread across what arrived. Recording a batch takes each ingredient off stock in the right unit, from the right lot. A sale or a shipped order takes it out, and Shopify orders come in. Waste is written off with a reason. Every movement is a permanent record of who, when and why, so the stock card for any item is its history, ready to read.

Cost runs with it. Stock is costed by moving average, as on the card above, or in FIFO layers, chosen when you set up and locked once stock has moved. Stock value is kept per site, item and type, with a month-by-month history.

And counts check it. Counts run on a phone, even with no signal, and show what each difference is worth before it's posted, so the 7 lb of flour shows up as a number with a value. TaroStack suggests what to count first, from what it would cost to be wrong and how much has happened since anyone looked, and stock can't go below zero by mistake.

Stock, counts, receiving, lots and stock value are on every plan, from $49 a month; batches that take ingredients off by recipe are on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

What is the difference between perpetual and periodic inventory?

Perpetual updates stock records with every purchase, batch and sale, so on-hand stock is always known. Periodic counts stock at the end of each period and works out what was used from the counts and purchases.

What is a perpetual inventory record?

A running record for each item: every movement in and out, with the balance in quantity and value after each. In the example, bread flour runs from 150 lb to 165 lb across a week at about $1.137 a pound.

Which is better for a small business, perpetual or periodic?

Periodic suits a small range of resold goods and one person. Makers with recipes, lots and dates, or more than one place usually need perpetual, with regular counts to check it.

Do you still need to count with a perpetual system?

Yes. Perpetual records drift through waste, mistakes and unrecorded use. Counts compare the records with the shelf, and the differences show what's going missing.