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Choosing an inventory method

Before filling out your inventory, it's important to consider the kind of items you sell — are they slow-moving items that are easy to count manually, or do you buy and sell them so quickly it's difficult to keep track of how many you have?Depending on the answer to this you'll use either a perpetual or a periodical (also known as physical) inventory method. Don't worry about the terminology, it's a lot easier than it sounds.

Perpetual inventory:

  • is best for businesses with high-volume sales where physical inventory counts are time-consuming and costly

  • can also work well for smaller businesses, as it ensures more accurate bookkeeping and can easily be scaled up as the business grows

  • automatically updates stock quantities in real time for each sale and purchase

  • gives you an instant view of the quantity of goods on hand, enabling you to plan restocking

  • almost completely reduces human errors through automation.

Periodical inventory:

  • is best for businesses that sell low-volume products that can be easily counted, such as cars or artwork

  • requires that items are tracked by a periodical physical count, like at the end of the financial year

  • means you need to create journals to report the value of stock you have on hand

  • involves manual processes, so it can be tedious, time-consuming and prone to errors.

Try perpetual inventory

As perpetual inventory has clear advantages over periodical inventory – and because perpetual inventory for up to 10 items is included with your MYOB Business subscription – we recommend that you give perpetual inventory a go, perhaps testing it with a few items if you're not sure.

Once you use an item in a transaction, you can't change it's inventory method – see the FAQs below.

If you're still not sure which method to choose, check with your accounting advisor.

What's next?

Once you've decided which inventory method to use, see our Inventory help topic to learn what else you can do and how to set up your inventory items.

FAQs