Raw Materials, WIP & Finished Goods: Controlling the Manufacturing Process and Maximizing Profits

🍇 Streamline Your Production Budgeting with Forecast 5’s Stock on Hand

Are you engaged in manufacturing, or do you — or your clients — have raw materials, work in progress, and finished goods that need to be controlled, costed, and sold? Forecast 5 helps you budget your work in progress, report your average cost of production, and when pricing your finished goods, gives you a clear analysis of all production costs.

In Forecast 5, we call this a Stock on Hand Record.

📌 Stock on Hand Across Industries

Stock on Hand can take many forms:

🔹A bill of materials for manufacturing

🔹Cost breakdowns for a winery

🔹Job costing for construction projects

🔹Tracking services in professional services firms such as accountants, quantity surveyors, or lawyers

🔹Budgets for farming, land development, engineering, and more

Forecast 5 uses three main stock records, with all entries initially landing on the balance sheet. But it’s what happens next that brings the magic!

🧩 Building the Cost Components

Components of cost are assembled in a Stock on Hand record — as many as you need — to build up the budgeted value. These components may include raw materials, overheads, or wages. The records differentiate by unit numbers and value, producing the total stock cost and the average cost per unit.

Sales are linked by units to the Stock on Hand record, with appropriate Cost of Sales transfers to the Profit & Loss Account.

For example, in a construction contract, raw materials, labour, services, equipment, contingency, overheads, and facility costs can all be costed to the job estimate. Forecast 5 produces a full forecast bill of materials, allowing projects to be priced and invoiced over time — with or without retentions.

Invoices are processed as sales in the P&L, with Cost of Sales automatically transferring from the Stock on Hand in the balance sheet. This ensures accurate gross profit reporting, proper income accrual, and cashflow alignment.

🍷 Example: Winery Budgeting with Forecast 5

Take a winery, where the main costs occur in the vineyard and the cellar.

Based on expected production — litres, kgs, or tons (for instance, 1 ton of grapes may yield ~700 litres or ~930 bottles) — you budget for the various costs.

In the vineyard, Forecast 5 will have costs such as grapes, fertilizer, water, and wages are added to individual records, then accumulated into a Stock on Hand record (e.g., “Grapes”).

Forecast 5 automatically calculates total budgeted cost and average cost per unit.

During harvest, units are transferred from the vineyard to the cellar (“Bulk Wine” record), with additional costs like yeast, labour, overheads, bottles, labels, and packaging added.

Budgeted sales are designated as “From Stock on Hand,” and Cost of Sales transfers automatically to the P&L. Forecasts for the P&L, Cashflow, and Balance Sheet are updated in real time.

With a little luck from Dionysus (or Bacchus), you can sit back and enjoy a satisfying glass — along with the profits of a successful year!

🚀 The Bottom Line: Turn Control into Profit

Manufacturing profitability begins with control — and control starts with visibility.
When you accurately track raw materials, work in progress, and finished goods, you gain a clear picture of where your costs, time, and margins truly sit. That insight empowers smarter decisions, reduced waste, and stronger profitability.

Forecast 5 brings this control to life. It connects every stage of your manufacturing process to your financial forecasts, automatically updating your Profit & Loss, Balance Sheet, and Cash Flow as inventory moves through production. You can model production costs, plan for changes in material prices, and understand exactly how each unit affects your bottom line.

With built-in variance analysis, rolling forecasts, and what-if scenarios, Forecast 5 helps you respond to shifts in demand or cost structures with agility and confidence.
From budgeting raw materials to projecting finished goods sales, Forecast 5 turns complex manufacturing data into clear, actionable insights — so you can plan precisely, act decisively, and turn control into profit.

Originally Published in the ICAEW Professional Service Magazine, Winter 2019, Issue #26