Are you managing manufacturing accounting in Excel or on paper? Don’t know the real cost of your products, and raw material shortages appear at the worst moment? This is a typical situation for small and medium manufacturing businesses — and it has a concrete solution.
Automating manufacturing accounting lets you control the entire cycle: from raw material procurement through production orders to finished goods cost calculation. In this article, we’ll break down how it works in practice.
Why doesn’t Excel work for manufacturing accounting?
Excel is a calculation tool, not a manufacturing management system. It doesn’t connect inventory, recipes, and finances into a single system. Here are the specific problems manufacturers face:
- Approximate cost calculations. In Excel, it’s difficult to account for FIFO cost of each component, transport expenses, and currency differences. Result — you don’t know how much a unit of production actually costs.
- Shortages discovered during production. Without automatic deficit reports, you learn about raw material shortages when production is already running.
- Manual material write-offs. Each production order requires manual entry: how much to write off, how much to receive. With 10+ orders per day — that’s 2-3 hours of extra work.
- No link to sales. A customer ordered 500 units — how much raw material is needed? Excel can’t answer automatically.
- File versions. Who edited last? Which version is current? With a team of 3+ people — chaos is guaranteed.
More about when Excel stops working in our separate article.
What is a BOM (Bill of Materials) and why do you need it?
BOM (Bill of Materials) is a specification describing what components and in what quantities make up the finished product. In an ERP system, BOM is the foundation of all manufacturing accounting.
Recipes in ERPJS have a tree structure: finished product → assemblies → components. For example:
| Level | Component | Quantity | Unit |
|---|---|---|---|
| Finished product | Office chair | 1 | pcs |
| → Assembly | Metal frame | 1 | pcs |
| →→ Component | Tube 25×25 mm | 2.4 | m |
| →→ Component | Powder paint | 0.15 | kg |
| → Assembly | Seat | 1 | pcs |
| →→ Component | Plywood 10 mm | 0.12 | m² |
| →→ Component | Foam | 0.08 | m² |
| →→ Component | Upholstery fabric | 0.15 | m² |
Once the recipe is entered, ERPJS automatically:
- Calculates material requirements for any production quantity
- Checks stock availability and shows deficits
- Writes off components when production starts
- Calculates cost based on actual purchase prices (FIFO)
More about creating specifications on the ERP for manufacturing page. And about the difference between Excel and ERP for technology cards — in our blog.
How does a production order work in an ERP system?
A production order is the document that initiates the manufacturing cycle. In ERPJS, the process consists of 4 steps:
Step 1: Create the order. Specify what to produce (item from catalog), quantity, destination warehouse. The system automatically pulls the recipe and calculates component requirements.
Step 2: Check availability. The system shows whether all components are in stock. If something is missing — it generates a deficit report with exact quantities needed from the supplier.
Step 3: Start production. When set to “Started” status — components are automatically written off from stock. Start date and time are recorded.
Step 4: Completion. When set to “Completed” — finished goods are received into stock with calculated cost price. Completion date is recorded.
The entire document chain can be viewed in the document tree: customer order → production order → material write-off → finished goods receipt → shipment → invoice.
How to automatically calculate product cost?
Cost calculation is every manufacturer’s biggest headache. In Excel, it’s always approximate. In ERPJS — automatic and precise.
The system calculates cost using the FIFO (First In — First Out) method, item by item, per warehouse. This means:
- Each batch of raw materials has its own purchase price
- When writing off for production — the oldest batch price is used
- Additional costs (transport, customs) are distributed to cost price
- Finished product cost = sum of all written-off component values
Example: you produced 100 chairs. The system automatically calculates that each chair used UAH 847 in materials (tube — 312, plywood — 98, foam — 45, fabric — 127, paint — 65, hardware — 200). You know the exact margin at a selling price of UAH 1,500 — it’s UAH 653 (43.5%).
What reports do you need for production control?
Without reports, production is a “black box.” ERPJS generates 7 key reports for manufacturers:
| Report | What it shows | Why you need it |
|---|---|---|
| Production list | All production documents with filtering | Current status control |
| Production orders | Planned and completed orders | Workload planning |
| Production deficit | Component shortages for planned orders | Timely raw material ordering |
| Order deficit | Shortages for specific customer orders | Purchase prioritization |
| Production capacity | What can be produced from current stock | Raw material optimization |
| Production statistics | Output volumes by period | Productivity analysis |
| Cost variance | Planned vs actual cost | Deviation control |
The deficit report is the most important for daily work. It shows: “to fulfill next week’s orders, you need to order 150 kg of foam and 80 m² of fabric.” Without it, you either order by guessing (and overpay for excess stock) or discover shortages mid-production.
How to switch from Excel to ERP manufacturing accounting?
You don’t need to switch in one day. Here’s a step-by-step plan for a manufacturing business:
Week 1-2: Catalog and inventory. Upload items (raw materials and finished goods) into the system. Enter stock balances. ERPJS supports Excel import, so existing data doesn’t need manual entry.
Week 3: Recipes. Create BOMs for your top 5-10 products. This is the main time investment — but it’s done once.
Week 4: First production orders. Run 2-3 orders in parallel with Excel. Compare results. Usually at this stage, cost discrepancies emerge — ERP shows a more accurate picture.
Week 5+: Full transition. Drop Excel for manufacturing accounting. Keep it only for analytics if needed.
How to choose the right software for your business — see our guide with 7 selection criteria.
Frequently asked questions
Is ERP suitable for small manufacturing with 5-10 employees?
Yes. ERPJS scales from small manufacturing to mid-size business. The system is useful with 10+ production orders per week — when manual accounting starts taking more time than actual production.
How long does it take to create recipes (BOMs)?
One recipe with 5-10 components takes 10-15 minutes. For a business with 50 products — about 2 working days of one-time setup. After that, recipes are only adjusted when product composition changes.
How does the system calculate cost with different raw material purchase prices?
ERPJS uses FIFO — writes off the oldest batch first. Each product’s cost is calculated automatically based on actual component purchase prices, including additional costs (transport, customs duties).
Can I import existing data from Excel?
Yes. ERPJS supports importing catalogs and balances from Excel. Product catalog, counterparts, stock balances — everything can be loaded via Excel import, no manual entry needed.
What is the “document tree” and why does a manufacturer need it?
The document tree is visual navigation through the chain: customer order → production order → component write-off → finished goods receipt → shipment → invoice. You see the entire path from customer request to payment in one window.
Try ERPJS for manufacturing
Free plan with no time limits. Recipes, production orders, cost calculation — all included. Sign up →