Inventory of Raw Material
For every manufacturer, keeping accurate inventory of raw material is an important first step to precise inventory tracking. When raw materials arrive from suppliers, the ability to log them accurately using a barcode scanner or RFID allows staff to quickly capture every detail ranging from components, description, size, weight, color, etc. And if you use a perpetual inventory system, your inventory counts and costs will simultaneously update across all departments and locations.
Some raw materials inventory examples are chemicals, ingredients or resources like oil, gas, steel, aluminum, flour, sugar, eggs, etc. Raw materials inventory includes the costs prior to beginning production and include both direct and indirect materials. Direct materials get incorporated into the finished product while indirect materials are used in production processes.
Once your raw materials are combined or altered, they become work in progress inventory and accumulate costs such as labor and overhead with each workflow stage incurred. When you account for total costs along the production process, your finished product cost will account for those costs incurred during production.
SOS Inventory makes managing and tracking of raw materials easy to do. To determine quantities and costs of raw materials, you can run a report to see totals for any material. Raw materials are inputs and finished goods are outputs.
Once received, raw materials are entered as assets on your balance sheet which are reflected as debits to the raw materials inventory account and a credit to accounts payable. Indirect materials debit the overhead account and become part of the total costs of goods sold in the general ledger. On occasion, raw material can become obsolete; they can expire or break and thus should be included in the total cost of goods sold. (These loss totals would be credited to the raw materials inventory account).
Users can choose FIFO, LIFO or weighted average valuations. The inventory value reflects the actual cost paid for that product; however, the cost for any material can fluctuate throughout the year, impacting total costs and profits.
Raw Material Inventory Management
In SOS Inventory, raw materials are used to create builds or process transactions. As the raw materials move into a production phase, the quantities required to create a product and all associated costs are attributed to that product. The quantities used are removed from raw materials inventory. When all the stages of production are complete, the finished goods item is added to inventory.
As finished goods are sold, SOS Inventory users can automatically purchase raw materials inventory with purchase orders triggered by reorder points or created manually.
SOS Inventory works for both discrete and process manufacturing, accommodating all types of manufacturing processes and methods.
For accurate inventor of raw material, work in progress and finished goods, forward and backward traceability, in-depth reporting analytics, easy installation and use, and no setup or cancellation fees, SOS Inventory offers incredible value to small businesses seeking advanced manufacturing and inventory capabilities without the cumbersome learning curve of enterprise ERP systems. Even more enticing is the low monthly price that puts quality inventory management within reach. Why not get started today with a no risk, free trial?