Tally for Manufacturing Businesses: BOM, Production Vouchers, and Job Costing

Of all the business types that use Tally, manufacturers get the most value from it. Tally Prime's manufacturing features — Bill of Materials, job costing, multi-godown inventory, batch tracking, and production vouchers — go far beyond what any cloud accounting software offers at a comparable price.

This guide is for manufacturing businesses: small factories, job-work units, process manufacturers, and assembly operations. It explains how to set up and use Tally Prime's manufacturing capabilities properly.

Why Manufacturers Prefer Tally Over Cloud Alternatives

Cloud accounting tools like Zoho Books and QuickBooks are designed primarily for service businesses and simple trading operations. They lack the depth of inventory and production management that manufacturers need. Tally Prime, by contrast, was built for Indian manufacturing businesses and has evolved over 35+ years based on their requirements.

Setting Up Tally for Manufacturing

Enable manufacturing features

Press F11 (Company Features) and enable:

• Inventory features → Maintain multiple godowns/locations
• Inventory features → Use Bill of Materials
• Inventory features → Use manufacturing/production journals
• Inventory features → Enable batch-wise details (if using batch tracking)
• Accounting features → Maintain cost centres (for job costing)

Create stock groups and categories

Organise your stock items clearly:

• Raw Materials — all input materials (steel, fabric, chemicals, etc.)
• Work in Progress (WIP) — semi-finished goods
• Finished Goods — completed products ready for sale
• Packing Materials — boxes, bags, labels
• Consumables — items consumed in production but not part of the finished product

Set up godowns (warehouses/stores)

Godowns in Tally represent physical storage locations. For manufacturing:

• Raw Material Store — incoming materials before production
• Production Floor — materials issued to production
• Finished Goods Warehouse — completed products
• Dispatch Bay — items packed and ready to ship
• Job Work Premises — materials sent to subcontractors

Navigate to: Inventory Info → Godowns → Create

Bill of Materials (BOM) in Tally

A Bill of Materials defines what raw materials and quantities are needed to produce one unit of a finished product. This is the foundation of manufacturing accounting in Tally.

Creating a BOM

1. Go to Inventory Info → Stock Items → Create/Alter
2. Open the finished product stock item (e.g., "Cotton T-Shirt - White XL")
3. Press Alt+C or enable BOM option in the item master
4. Add each raw material component with its quantity per unit:
   • Cotton fabric — 1.2 metres
   • Thread — 50 metres
   • Button — 5 pieces
   • Label — 1 piece
5. Add manufacturing overhead items if needed (consumables, packing)
6. Save the BOM

Multiple BOMs for the same product

Tally allows multiple BOMs for one finished product — useful when you have:

• Different quality grades using different raw material specifications
• Alternative material substitutions
• Different production methods (hand-made vs machine-made)

Production Vouchers in Tally

A Manufacturing Journal (Production Voucher) records the actual production — raw materials consumed and finished goods produced.

Navigate to: Inventory Vouchers → Manufacturing Journal (or press Alt+F7)

Steps to record a production entry

1. Select the production date
2. Under Name of Item, select the finished product being manufactured
3. Enter the quantity being produced
4. Select the BOM to use (if multiple exist)
5. Tally auto-populates the raw materials required (based on BOM × quantity)
6. Adjust actual consumption if it differs from BOM (due to wastage, variation, etc.)
7. Select the source godown (Raw Material Store) and destination godown (Finished Goods)
8. Save with Ctrl+A

Tally will automatically:

• Reduce raw material stock from the source godown
• Increase finished goods stock in the destination godown
• Value the finished goods based on raw material cost + any additional costs

Job Costing in Tally

Job costing tracks the total cost of each production job or order — materials, labour, machine time, overheads. This is essential for pricing decisions and profitability analysis.

Setting up job costing

1. Enable Cost Centres in F11
2. Create a Cost Category called "Job Orders"
3. Create a Cost Centre for each job (e.g., "Order #JO-2026-001")
4. When recording purchase invoices, production vouchers, and expense entries — allocate each entry to the relevant job cost centre
5. Run the Cost Centre report to see total cost per job

This tells you exactly whether each job is profitable — and by how much.

Job Work / Subcontracting in Tally

Many manufacturers send materials out for job work (cutting, stitching, finishing, plating, etc.) and receive goods back after processing. This involves:

• Material sent to job worker — use a Material Out (delivery) voucher, selecting the job worker's premises as the destination godown
• Material received from job worker — use a Material In (receipt) voucher
• GST on job work: job worker raises a service invoice; you account for the service cost in the finished goods cost

Note: Under GST, goods sent for job work without transferring ownership are not taxable supply — but must be recorded with a delivery challan.

Batch and Expiry Date Tracking

For pharma, food, chemical, or FMCG manufacturers — batch tracking is essential for:

• Quality control and product recall (trace which batch was sold to whom)
• Expiry date management (FEFO — First Expiry First Out)
• Regulatory compliance (pharma and food manufacturing)

Enable batch details in F11, then specify batch number and expiry date when creating production vouchers and sales/purchase entries.

Scrap and By-Product Accounting

Production generates scrap. In Tally:

• Create a stock item called "Scrap" or the specific scrap type (e.g., "Metal Offcuts")
• In the Manufacturing Journal, add scrap as a by-product under the output section
• Assign a value to the scrap (selling price or estimated value)
• This reduces the effective cost of the main finished product

Reports for Manufacturing Businesses

Common Manufacturing Accounting Mistakes in Tally

• Not recording production entries regularly — without production vouchers, your raw material stock inflates and finished goods stock is wrong
• BOM not updated when formulation changes — if you change the product recipe but not the BOM, all production cost calculations are wrong
• Ignoring material wastage — actual consumption often exceeds BOM quantity due to rejections and wastage; always adjust actual consumption in production vouchers
• Treating job work as purchase — sending material to a job worker and receiving it back is NOT a purchase; it should go through material transfer vouchers
• Not doing regular stock audits — Tally's book stock should match physical stock; discrepancies need investigation

Outsourcing Tally for Manufacturing

Manufacturing Tally work is among the most complex of any business type — production vouchers, job costing, multi-godown transfers, batch tracking, and GST on job work all require specialised knowledge. Many manufacturers outsource their Tally to specialists who understand manufacturing workflows.

AutoTally has experience with manufacturing businesses across textiles, engineering, food processing, and chemicals. Our team handles the full Tally workload — from production vouchers and inventory management to GST filing and monthly MIS reports.

Get a free quote — tell us about your manufacturing operation and we will scope the right solution.