How to Leverage Manufacturing Processes in Tally

Introduction

Manufacturing is the backbone of any economy. Whether you’re producing garments, electronics, chemicals, or furniture, efficient manufacturing processes are key to productivity, cost savings, and profitability. With the rise of ERP and accounting software, managing manufacturing has become more streamlined than ever before. One such software that has transformed manufacturing accounting in India and beyond is TallyPrime (previously known as Tally ERP 9).

This article explores how to leverage manufacturing processes in Tally to ensure operational efficiency, seamless inventory control, accurate cost tracking, and comprehensive reporting.

1. Understanding Manufacturing in Tally

Manufacturing in Tally refers to the process of converting raw materials into finished goods, all within the software’s ecosystem. It involves creating bills of materials, stock items, recording consumption of inputs, and generating output.

Tally allows businesses to manage:

• Raw material consumption
• Cost of production
• Stock movement
• Multiple product assemblies
• Sub-assemblies and packaging

It is especially beneficial for small to mid-sized manufacturing units in industries like FMCG, textiles, auto components, and electronics.

2. Features of Tally for Manufacturing

TallyPrime supports a wide array of features specifically designed for manufacturers:

• Bill of Materials (BOM):Helps define the list of components needed to manufacture a product.
• Stock Journals: For recording production and movement of goods.
• Job Work In/Out: For subcontracting manufacturing work.
• Multiple Godowns/Locations: Useful for managing inventory across multiple sit
• Batch and Expiry Tracking: Especially helpful for perishable products.
• Cost Tracking: Monitor actual cost versus estimated production costs.
• Order Processing: Track purchase and sales orders linked with manufacturing.
• GST Compliant: Automatically calculates input tax credits and output GST.

3. Configuring Manufacturing Module in Tally

Before you start recording any manufacturing activity, you must configure Tally properly.

Step-by-Step Configuration:

Enable Inventory Features:

• Go to: F11 > Inventory Features
• Set “Use Bill of Materials” to Yes
• Enable “Use tracking numbers,” “Use batches,” or “Maintain multiple Godowns” as needed.

Enable Costing and Job Work:

• Go to: F11 > Accounting Features
• Set “Use cost centers” to Yes
• Set “Enable Job Order processing” to Yes

Create Stock Groups and Units of Measurement:

• Use Inventory Info > Stock Groupsto classify raw materials and finished goods
• Define units like pcs, kg, meter, etc.

This setup forms the foundation for seamless manufacturing entry in Tally.

4. Creating Stock Items and BOM (Bill of Materials)

The Bill of Materials (BOM) is essential for manufacturing automation in Tally. It specifies what raw materials and how much quantity is required to produce a finished item.

Step-by-Step: Creating BOM

Create Finished Goods Stock Item:

• Go to: Inventory Info > Stock Item > Create
• Name the item (e.g., Wooden Table)
• Under “Set Components (BoM)?” choose Yes

Define BOM:

• Add raw materials (e.g., Wood Plank, Nails, Varnish)
• Mention quantity needed per finished good
• Assign costs if required

Tally allows you to define multiple BOMs for a single product – ideal for variants or customizable products.

5. Recording Manufacturing Transactions in Tally

Once setup is complete, you can begin recording actual manufacturing operations using Stock Journal Vouchers.

Example:

Let’s say you manufacture 10 Wooden Tables using:

• 10 Wood Planks
• 100 Nails
• 5 Liters of Varnish

Steps:

• Go to: Voucher > F7 (Stock Journal)
• Under Source (Consumption):
• Add raw materials with respective quantities
• Under Destination (Production):
• Add 10 Wooden Tables
• Save the voucher

Tally will automatically adjust stock levels and calculate cost of production if rates are given.

6. Tracking Cost of Production

Cost control is critical in manufacturing. Tally allows manufacturers to:

• Allocate direct costs(like raw materials)
• Allocate indirect costs(like electricity or labor)
• Use cost centerst o monitor department-wise expenses

Advanced Tip:

You can use Additional Cost Details while entering vouchers to assign overheads like rent, electricity, etc., proportionately across products.

7. Using Job Work in Manufacturing

Job Work is when you send materials to a third-party for manufacturing or processing. Tally has a dedicated feature to manage this.

How to Use:

• Enable Job Work under F11 > Features
• Create ledger accounts for the Job Worker
• Use Job Work Out Order to record material issue
• Use Receipt Note when finished goods are received back
• Costing and stock are adjusted automatically

This is extremely useful for businesses in textiles, jewelry, and packaging where subcontracting is common.

8. Managing Inventory and Stock Reports

Tally’s inventory reports are robust and insightful.

Useful Reports:

• Stock Summary: Snapshot of closing balance of stock
• Movement Analysis: Tracks how stock is consumed or produced
• Reorder Levels: Alerts when stock is low
• Godown Summary: Location-wise stock availability
• Manufacturing Journal Reports: Detailed consumption and production records

These reports help in minimizing dead stock, avoiding shortages, and making informed purchasing decisions.

9. Integration with Accounts and GST

Tally doesn’t treat inventory and accounting as two separate silos. Instead, it offers seamless integration.

Benefits:

• Automatic Costing: Cost of production is reflected in the Profit & Loss statement.
• GST Input/Output: GST on raw material is claimed as credit, and output GST on finished goods is calculated.
• Stock Valuation: Based on FIFO, LIFO, Average, or other methods.

This holistic view aids better decision-making and compliance with tax regulations.

10. Advanced Tips to Maximize Tally for Manufacturing

Here are some pro tips to get the most out of Tally in a manufacturing setup:

• Use Godowns for Departmental Control: Track production stages like Assembly, Quality Check, Packaging
• Batch Tracking for Perishables: Especially useful in food, pharma, and chemicals
• Track Scrap and Wastage: Account for unused or discarded materials
• Use Auto Cost Tracking: Let Tally distribute costs automatically across BOM
• Customize Invoices and Reports: Use TDL (Tally Definition Language) or third-party plugins

13. Conclusion

TallyPrime is not just an accounting software—it’s a powerful tool for streamlining manufacturing operations, tracking inventory, managing costs, and ensuring tax compliance. Whether you’re running a small workshop or a mid-sized factory, Tally’s manufacturing features offer everything you need to maintain control and scale efficiently.

By leveraging features like BOM, stock journals, job work, and cost centers, businesses can reduce wastage, optimize production, and maximize profits—all from within a single software platform.

So, if you’re still managing your manufacturing process with spreadsheets or outdated methods, it’s time to let Tally do the heavy lifting.