A bill of materials (BOM) lists every component, raw material and quantity needed to make one finished product. Xero and MYOB's small-business accounting don't manage full BOMs, multi-level assemblies or production runs (MYOB AccountRight handles simple assembled items), so small manufacturers usually handle BOMs in one of three places: a spreadsheet, an inventory or manufacturing app connected to Xero or MYOB, or a larger operations system. The right choice depends on how many products you make, how complex they are, and whether you need accurate costing and stock as you produce. This guide explains each option and the signs you've outgrown the one you're using.
What a BOM needs to do
A useful bill of materials does more than list parts. It should:
- list components and quantities for each finished product, including sub-assemblies,
- cost the product from current component prices, labour and overheads,
- reduce stock of components and increase finished goods when you produce,
- flag shortages before a production run, so you can order in time,
- handle changes, such as a new supplier, a substitute part or a revised design, without breaking history.
Spreadsheets handle the first two. The last three are where they struggle.
Option 1: A BOM spreadsheet alongside Xero or MYOB
Good for: a small range of simple products, low volume, and one person who owns it.
Watch for: stock in the spreadsheet drifting from reality, costs going stale as supplier prices change, and nobody else knowing how the formulas work. Production isn't recorded anywhere the accounts can see.
Option 2: An inventory or manufacturing app connected to your accounts
Several inventory and manufacturing apps add BOMs, assemblies and production orders on top of Xero or MYOB, and post the stock and cost movements to the accounts.
Good for: small to medium manufacturers with standard products, where the app's way of working fits yours.
Watch for: apps priced per user or per order that grow expensive with volume, gaps in multi-level assemblies or job-based work, and integrations that sync only part of what you need. Check how it handles the specific things you make before committing.
Option 3: An operations system alongside your accounts
For manufacturers with more complex products, made-to-order work, or several sites, an operations system such as ERPNext can run BOMs, production planning, work orders and stock, while Xero or MYOB keep the accounts.
Good for: multi-level BOMs, production scheduling, job-based manufacturing and growth.
Watch for: it's a bigger project. It needs good data (clean item codes, accurate BOMs) and a plan for moving across without disrupting production.
Signs you've outgrown your current setup
- Production runs stop because a component ran out unexpectedly.
- Product costs are a guess, or updated once a year.
- Stock counts never match the system.
- The BOM spreadsheet has several versions, and only one person trusts it.
- Finished goods and components are retyped into Xero or MYOB.
Getting the basics right first
Whatever you choose, the same groundwork makes it work:
- Clean item codes, one code per component, used everywhere.
- Accurate BOMs for your top-selling products first.
- A regular stock count of components, to reset the starting point.
- Clear ownership: one person responsible for keeping BOMs up to date.
Frequently asked questions
Does Xero have a bill of materials feature?
Xero's core accounting doesn't manage full bills of materials or production. Manufacturers usually use a connected inventory or manufacturing app, or keep BOMs in a spreadsheet alongside Xero.
Does MYOB support bills of materials?
MYOB AccountRight can build simple assembled items from components, which suits basic kits and assemblies. Multi-level BOMs, production orders and costing usually need MYOB Acumatica or a connected manufacturing app. Check against your products' complexity before relying on built-in features.
What's the difference between a BOM and a work order?
A BOM is the recipe: what goes into a product. A work order is an instruction to make a specific quantity of that product, using the BOM to work out what components to take from stock.
When should a small manufacturer move off spreadsheets for BOMs?
When production stops because of unexpected shortages, costs are unreliable, or stock never matches. Those are signs the spreadsheet can't keep up.
We help manufacturers set up BOMs, costing and stock alongside Xero or MYOB, from choosing the right app to connecting a full operations system. See manufacturing job costing and manufacturing ERP integration, or book a free initial chat.