The Difference Between LIFO and FIFO

The Difference Between FIFO and LIFO


When it comes to inventory management, LIFO and FIFO are the two most common inventory management techniques. While both management systems have their advantages, it’s best to have a good understanding of the different industrial management systems available when determining what is the best fit for your business. Keep in mind that LIFO and FIFO systems can alter your income and taxes, so it is always best to consult with a finance professional for the accounting aspects of inventory management.

Last In, First Out (LIFO)

The Last In, First Out inventory management approach means that items last stocked are the first to sell. With this inventory management style, businesses get a better idea of market costs and inventory movement in their warehouse. Inventory stock that has been recently placed but unsold remains in inventory until the end of the year. LIFO inventory works best with products that is constantly changing in price and taxation. By using LIFO, businesses can work keep up efficiently with changes in pricing.

While the basics of LIFO are easy to understand, more complications arise when varying taxation is put into effect. To learn more about the accounting side of LIFO management, click here.

Storage Options Using LIFO

For industrial storage material, storage options using LIFO are:

First In, First Out (FIFO)

The First In, First Out inventory management approach means that items first stocked are the first out. Inventory management that operates using FIFO are often the most profitable businesses. One of the main reasons that FIFO is a popular choice is because it allows for businesses to work on a straight-line approach. FIFO management works best with companies with products that stay consistently the same price throughout the year.

Perishable products or products with a shelf life work best with FIFO management because they are consistently moved.

On paper, companies that operate using FIFO are typically more profitable but it requires consultation from finance professionals. To learn more about FIFO management’s financial and accounting aspects, click here.

Storage Options Using FIFO

For industrial storage material, the following are pallet racking options

When looking at your individual business and inventory, it’s important to understand the inventory management options, especially when considering warehouse material. LIFO and FIFO both offer great benefits and a variety of different pallet racking style so understanding the pros and cons can help you find the perfect pick. Pacific Bend Inc. is dedicated to providing warehouse material regardless if your inventory is managed by LIFO or FIFO.

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