Estimating work in process from bills of materials

When a small factory can estimate the materials in unfinished production from its bills of materials instead of counting them, and how to post it.

By Achekam · 11 October 2026 · 5 min read · For Manufacturing businesses in South Africa, Nigeria, Kenya

At month end, a bakery-equipment maker has ovens at every stage on the factory floor: some are bare frames, some have their elements fitted, a few are waiting only for their doors. Each holds materials the business has paid for. None can be sold yet. What are they worth?

The rigorous answer is to count every part on every unit. Few small factories have the time to do that monthly. The shortcut many use is to take the number of units in production and multiply by what the bill of materials says each one contains. That shortcut has a name, backflushing, and it works well in some factories and badly in others. This article explains when it is accurate enough and how to get the result into your books.

What work in process is

AccountingTools defines work in process, also called work in progress or WIP, as goods in production that have not yet been completed. They sit between raw materials and finished goods in the production flow.

Not every factory has much of it. AccountingTools notes that a manufacturer of simple products that completes all units by period end may report no work in process at all, with inventory moving straight from raw materials to finished goods. A bottling plant that finishes every batch the day it starts is a good example. A factory building ovens over several weeks is the opposite.

Backflushing: units times the bill of materials

AccountingTools describes backflushing as estimating the materials cost in work in process by multiplying the number of units in process by the bill of materials for those units. Instead of counting the frames, elements and doors on the floor, you count the ovens and let the bill of materials say what they contain.

It says this can be reasonably accurate when two conditions hold:

1. All materials are added at the start of production. If every oven gets its full kit of parts on day one, a unit in process contains everything on the bill, whatever stage it has reached.
2. The bills of material are very accurate. If the bill is out of date, or the floor routinely uses more than it says, the estimate inherits the error on every unit.

Where it goes wrong

The oven maker in the example fails the first test: elements and doors are fitted later. Multiplying units by the full bill would value a bare frame as if it were a nearly finished oven. Two adjustments can help: estimate the stage each unit has reached and apply only the materials added by that stage, or keep separate bills for each stage. Both need someone on the floor to say where each unit is. If that becomes as much work as counting, count.

Standard cost or actual cost

The bill of materials says what goes in. You still need a cost for each part. AccountingTools explains that standard costs are easier to use for work in process accounting but less precise than actual costs, especially if the standards are inaccurate or production is significantly inefficient.

For a small factory, standard costs make backflushing workable: each bill has a cost per unit, and the estimate is a multiplication. The risk is that the standards drift away from what parts really cost, or that the floor wastes materials the bill does not allow for. Review standards whenever an input price moves noticeably, and compare the estimate with a physical count from time to time. Any difference that remains in your overhead or cost accounts at month end is the subject of factory overhead not absorbed by month end.

Perpetual records or a count at period end

AccountingTools states that in a perpetual inventory system work in process should be updated continuously, while in a periodic system it is typically updated at the end of each accounting period from physical counts and cost summaries.

Most small factories run periodically. A sensible pattern:

The year-end count is covered in who should count a factory's stock.

Keeping the bills beside the books and posting by journal

Achekam's Item Master holds products with SKU, name, category, selling and cost price, opening quantity and VAT treatment, and needs the Point of Sale, Warehousing or Wholesale add-on. It does not hold the components of a product. Keep your bills of materials and the backflush calculation in a controlled spreadsheet or your planning tool, beside the books.

Getting the result into the ledger is a manual step. Stock counts, wastage, transfers and opening quantities do not post to the general ledger in Achekam; only till sales and till returns move the inventory account. So each month:

1. Calculate the work in process value from units and bills.
2. Compare it with the balance on your work in process account.
3. Post a manual journal for the difference, between work in process and raw materials or cost of sales, as your accountant advises.

Achekam refuses a journal that does not balance or is dated in a closed month, and a posted journal is corrected only by a reversal, so the month's estimate and any later correction both stay visible.

When units are finished, their cost becomes finished goods. Cost of sales in Achekam uses the single cost price typed on each product, with no FIFO or weighted-average costing, so make sure that price reflects what the bill and the standards say a finished unit costs. Working out finished goods cost covers how.

Decide which method fits your floor

AccountingTools' article on work in process accounting explains the definitions, backflushing and the perpetual and periodic approaches. Walk the floor at the next month end, note which materials go in at the start and which later, and decide from that whether backflushing will be accurate enough for you.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.