QuickBooks Desktop’s Bill of Material (BOM) Discussed

A bill of materials (BOM) is extremely important in manufacturing. Many companies rely on accounting and enterprise resource planning (ERP) tools to create and track BOMs, including labor, overhead, and costs of subassemblies. QuickBooks Desktop Enterprise is popular among manufacturing companies because of its industry-specific features, which include the ability to create BOMs and track BOM costs. 

What is a Bill of Materials (BOM)?

A bill of materials is a structured, extensive list of the raw materials, components, and parts needed to build or repair a product. It also includes the quantities in which the materials are needed, along with their names, descriptions, and costs—as well as the instructions required to manufacture or repair a product. It’s essentially like a recipe for creating the final product.

Why Are BOM Creation and Cost Tracking Important?

Creating BOMs and tracking BOM costs are crucial to ensure manufacturing workflows are as efficient and cost-effective as possible. By accurately tracking BOM costs, you can properly monitor inventory levels, ensure accurate cost of goods sold (COGS), improve purchasing decisions, and boost your profit margins.

BOMs in QuickBooks Desktop Enterprise 

With QuickBooks Desktop Enterprise, you can create detailed BOMs from the inventory assembly form, which you can access from the Lists menu on top of your QuickBooks Enterprise dashboard. 

You can create different types of inventory, including assembly. To create an assembly, you’ll need to provide important information, such as the product description, the costs of all the parts and components in the bill of materials, and the sales price. 

Read our step-by-step guide to creating assemblies in QuickBooks Desktop.

When BOMs are created, QuickBooks Enterprise will automatically track any changes and identify discrepancies that can occur, let’s say when multiple areas (such as manufacturing and engineering) create BOMs for the same product. When QuickBooks Enterprise detects that the cost of a particular component or part changes, it will automatically update labor and material costs, eliminating the need for manual data entry. As for tracking expenses, you can use either the average cost accounting or the First-in First-out (FIFO) method, making it a very flexible solution for your inventory accounting needs.

Is BOM Available in Other QuickBooks Products?

BOM tracking isn’t available in QuickBooks Online and QuickBooks Pro. Manufacturing businesses will need to upgrade to QuickBooks Desktop Enterprise to get the full functionality of BOM in QuickBooks, in addition to other features useful for manufacturing companies, like Advanced Inventory, Advanced Pricing, backorder tracking, and industry-specific reports.