An inventory control system is an important tool for companies for managing accounts, forecasting, replenishment, accounting services, and production planning. There are different types of inventory control systems that range from eyeball systems to perpetual computer-run systems.
An Eyeball System is the standard method followed in the small manufacturing operations and in a large number of retail applications. The key manager plays the important role and finds out the items that are out of stock to reorder. The main difficulty with this system is that some items are left unnoticed for a large number of periods and remain out of stocks without notice. Because of this difficulty, the production operation may suffer until the required stock is replenished.
The reserve stock system is another accounting method and it is more systematic than the eyeball techniques. In this method, some items are placed as reserved items in a brown bag and placed in the storage area. After the last available inventory is used, the reserve stock items are opened and an order is placed for the particular item immediately. This system requires proper calculation of reserve stock items. Calculating the proper amount is difficult and you may wish to have an accounting service firm perform this for you. This is a simple and very effective system for any type of organization.
There are various types of perpetual inventory systems such as manual, computer-oriented, and card-oriented systems. In the computer-oriented method, a program reorders the required items, once the item falls below the required level. The main purpose of these three types of perpetual systems is to analyze dollar use or unit use of different stocks or product lines. These methods avoid stock-outs and maintain complete details of product lines where more emphasis is needed for selling or buying.
A periodic inventory system is another type of accounting services where the physical count of products is made at regular intervals, which may be weekly, monthly, or quarterly. The total number of items is counted at the end of each period and any new products purchased during the accounting period are also added to the list.
Another type of inventory system is the valuation system that consists of two important methods FIFO and LIFO. FIFO is called the first in first out method. Here, the value and cost of the oldest inventory (first purchased items) is used for understanding the sales transaction. LIFO is called the last in first out method, where the last purchased items are used to track the sales transaction.
The right inventory system combined with the latest accounting technology can definitely make the fortune for any company. Information brought to you by ClockWork Accounting Services.