How to Use Bill of Materials (BOM) in Tally Prime (2026)

If your business manufactures or assembles products from raw materials, tracking finished goods stock without tracking what went into them only tells half the story. A Bill of Materials (BOM) in Tally Prime defines exactly what raw materials and quantities go into one unit of a finished product, so every time you record production, the right raw material quantities get consumed automatically.

This guide covers setting up a BOM and using it during production entries.

What You Need Before You Start

• Tally Prime installed, with inventory features enabled — see our guide on how to manage inventory and stock in Tally Prime
• Your raw material stock items and finished goods stock items already created
• A clear list of exactly which raw materials, and how much of each, go into producing one unit of your finished product

Step 1: Enable Bill of Materials

1. Gateway of Tally, then F11 (Features), then F2 (Inventory Features)
2. Set Enable Bill of Materials to Yes (sometimes shown as part of manufacturing-related inventory settings, depending on your release)
3. Press Ctrl+A to save

Step 2: Create or Open the Finished Goods Stock Item

1. Gateway of Tally, then Inventory Info, then Stock Items
2. Create the finished goods item if it doesn’t exist yet, or open the existing one
3. While creating/altering the item, you’ll see an option to Set Components (BOM) — set this to Yes

Step 3: Define the Bill of Materials

1. In the BOM screen for that stock item, give the BOM a name if prompted (useful if you have more than one BOM version for the same product, for example different recipes or formulations)
2. Add each raw material that goes into producing one unit of the finished good
3. Enter the quantity of each raw material required per unit of finished output
4. If there’s a By-Product or scrap generated during production, you can typically account for that here too, depending on your release
5. Save the BOM

Example: To produce 1 unit of a finished wooden chair, your BOM might specify 2 units of wood planks, 0.5 kg of screws, and 1 unit of varnish. Every time you record production of chairs, Tally Prime consumes raw materials in that ratio automatically.

Step 4: Record Production Using a Stock Journal (Manufacturing Journal)

1. Gateway of Tally, then Vouchers, then Stock Journal
2. Select Manufacturing Journal mode if available, or configure the journal to use BOM-based consumption
3. Select the finished goods item you’re producing and enter the quantity being produced
4. Tally Prime automatically pulls in the raw materials and quantities defined in the BOM, scaled to the quantity you’re producing
5. Confirm the godown/location for both raw material consumption and finished goods output, if you’re using multiple godowns
6. Press Ctrl+A to save

This single entry reduces your raw material stock and increases your finished goods stock, in the correct proportions, without manual calculation.

Step 5: Handle Adjustments and Multiple BOM Versions

If your formulation changes over time, or you have more than one way of producing the same finished item:

1. Create additional BOM versions under the same stock item if your release supports multiple BOMs
2. Select the relevant BOM version at the time of recording each production entry
3. Update the active BOM whenever your actual production recipe changes, so future production entries reflect the current formulation rather than an outdated one

Step 6: Review Production and Consumption Reports

1. Gateway of Tally, then Display More Reports, then Inventory Books
2. Review the Stock Summary for both raw materials and finished goods to confirm quantities make sense after production entries
3. Compare actual raw material consumption against what the BOM predicted, especially if you suspect wastage or inefficiency creeping in over time

Common Mistakes to Avoid

• Setting up the BOM with incorrect quantities, which then silently miscalculates raw material consumption on every single production entry until someone notices
• Not updating the BOM when your actual formulation changes, leaving Tally Prime consuming raw materials based on an outdated recipe
• Ignoring scrap or by-products in the BOM when they’re a meaningful part of your actual production process, leading to inventory figures that don’t match reality
• Recording production through a regular Stock Journal without using the BOM-based consumption, defeating the purpose of setting one up in the first place
• Not reconciling BOM-predicted consumption against actual physical stock counts periodically, letting small discrepancies accumulate unnoticed

FAQs

Can one finished product have more than one BOM? Yes, many Tally Prime releases support multiple BOM versions for the same stock item, useful if you have different formulations or production methods for the same end product.

Does BOM account for wastage during production? You can typically factor in expected scrap or wastage within the BOM setup, depending on your release. If actual wastage varies significantly from this, it’s worth reviewing periodically.

Can I use BOM for assembly businesses, not just traditional manufacturing? Yes — BOM works for any scenario where a finished item is created by consuming a defined set of components, including assembly of purchased parts into a sellable unit.

What happens if I don’t have enough raw material stock to cover a production entry? Depending on your inventory settings, Tally Prime may allow negative stock with a warning, or restrict the entry. Check your inventory configuration if you want stricter control here.

How is BOM different from just manually recording a Stock Journal each time? Without a BOM, you’d need to manually calculate and enter each raw material consumption quantity every single time. BOM automates that calculation based on a defined recipe, reducing both effort and the risk of manual entry errors.