TallyPrime for Manufacturing in Saudi Arabia
Most small Saudi factories do not start with an ERP. They start with an accountant, a storekeeper and a spreadsheet that tracks what went into production. Then the questions get harder. What did this batch actually cost? How much raw material is sitting with the job worker in the Second Industrial City? Why is the finished goods value in the books different from the stock count?
TallyPrime answers a surprising number of these questions, provided it is set up for manufacturing rather than as plain accounting software. It also has clear limits, and a factory that hits them needs to know early.
I am Mohamed Abdul Baseeth, founder of Maas Consult Middle East Co. We have delivered 1,000+ ERP and accounting implementations and 800+ ZATCA compliance engagements in Saudi Arabia, across both TallyPrime and ERPNext. This guide covers what TallyPrime’s manufacturing features actually do, how to set them up for a Saudi factory, a worked costing example, and the point where a manufacturer should move to a full ERP.
Quick Answer
TallyPrime suits small and mid-sized Saudi manufacturers with straightforward production: one or a few production stages, a manageable number of products, and a finance-led team. It supports bills of materials (BOMs), including multiple BOMs per product, by-products, co-products and scrap; manufacturing journals that consume components and add overhead costs; job work for material sent to or received from subcontractors; job costing; batch and godown tracking; and built-in ZATCA e-invoicing. It does not offer production planning, MRP, routings, work centres or capacity scheduling. Factories that need those should look at a full ERP such as ERPNext.
Key Takeaways
- Manufacturing excluding oil refining made up 11.1% of Saudi GDP in 2025, and hundreds of new factories start production every month.
- TallyPrime’s manufacturing strength is accurate stock and cost: BOMs, manufacturing journals, scrap, by-products and job work, all posting straight to the books.
- The setup that matters most is godown design and BOM discipline, not software settings.
- TallyPrime stops at production planning. MRP, work orders with routings and shop-floor scheduling point to ERPNext.
- ZATCA Wave 25 brings manufacturers with VAT-subject revenue above SAR 187,500 in any of 2022 to 2025 into Phase 2, with an integration deadline of 1 February 2027.
Why Saudi Manufacturers Look at TallyPrime
Saudi manufacturing is growing fast. According to the General Authority for Statistics, manufacturing activities excluding oil refining contributed 11.1% of Saudi GDP at current prices in 2025. The Ministry of Industry and Mineral Resources issued 438 new industrial licences in July 2026 alone, and 189 factories began production that month, as reported by Argaam.
Most of those new factories are small. Their first need is not a complex ERP but reliable books, VAT and e-invoicing compliance, and accurate stock and product costs. That is where TallyPrime fits. It is ready-made, accounting-first software: entries post immediately and show their effect at once, with no secondary posting step, which is one reason auditors are comfortable with it and finance teams can correct entries on the spot. Many accountants in the Kingdom already know Tally, which shortens training.
TallyPrime Manufacturing Features Explained
Bill of Materials (BOM)
A BOM lists the components needed to make a finished item, for a set output quantity. In TallyPrime you can:
- Create one or several BOMs for the same item, for example a standard recipe and an alternative using a substitute raw material
- Set the BOM unit, meaning how many finished units the listed components produce
- Choose the godown each component is drawn from
- Mark lines as by-products, co-products or scrap, alongside regular components
- Copy an existing BOM and change only the parts that differ
Tally’s own guide to inventory in manufacturing walks through each of these.
Manufacturing Journal
The manufacturing journal records a production run. You select the finished item and BOM, enter the quantity produced, and TallyPrime consumes the components from the right godowns, adds the finished goods to stock, and records any by-products, co-products and scrap.
Two settings make it useful for costing:
- Additional costs: you can add overheads such as labour, power or factory expenses as a percentage, so the finished goods carry more than raw material cost.
- Cost allocation to by-products, co-products and scrap: a percentage of the component cost can be assigned to each, so the main product is not over-costed.
You can also create manufacturing journals manually for one-off or custom production.
Stock Journal for Transfers and Consumption
The stock journal records movement between godowns, such as raw materials issued from the main store to the production floor, and consumption that does not follow a BOM. The godown summary then shows exactly what sits where.
Job Work
Many Saudi factories send part of the process to outside workshops: cutting, coating, printing, machining. TallyPrime’s job work feature handles both sides:
- As the principal manufacturer: raise a Job Work Out Order, send raw material with a Material Out voucher, and receive finished or semi-finished goods with a Material In voucher.
- As a job worker: record a Job Work In Order, receive the customer’s material with a Material In voucher, and return finished goods with a Material Out voucher.
Job work reports show what has been sent and received against each order, so material sitting with a subcontractor does not disappear from view.
Job Costing
Job costing tracks costs and revenue for a specific job or project, from raw material purchases through indirect costs such as transport, packaging and depreciation to the sale of the finished goods. The Job Work Analysis report shows whether each job made a profit. This suits made-to-order manufacturers who quote job by job.
Batches, Godowns and Reorder Levels
Batch tracking with manufacturing and expiry dates matters for food, chemicals, cosmetics and other regulated products. Godowns separate raw material, work in progress, finished goods and scrap. Reorder levels flag raw materials before they run out.
Order Processing
Sales orders and purchase orders track what customers have ordered and what suppliers still owe you, so production can be matched to confirmed demand.
What TallyPrime Does Not Do for Manufacturers
Being clear about the limits saves a lot of frustration later.
| Need | TallyPrime | What to do instead |
|---|---|---|
| BOMs, scrap, by-products | Yes | |
| Manufacturing journal with overheads | Yes | |
| Job work (subcontracting) | Yes | |
| Job costing | Yes | |
| Batch and expiry tracking | Yes | |
| Material requirements planning (MRP) | No | Full ERP |
| Production planning and scheduling | No | Full ERP |
| Work orders with routings and operations | No | Full ERP |
| Work centres, machine capacity and shop-floor tracking | No | Full ERP |
| Built-in quality inspection workflows | No | Full ERP, or a separate quality process |
| Multi-level production with work-in-progress at every stage | Possible with multiple journals, but becomes heavy | Full ERP |
If several of the “No” rows describe your factory, TallyPrime will become a bottleneck. ERPNext covers these with work orders, routings, workstations, production plans, MRP and quality inspection. See our page on ERPNext for manufacturing.
How to Set Up TallyPrime for a Saudi Factory
The general TallyPrime rollout, from licensing to go-live, is covered in our TallyPrime implementation guide for Riyadh. These are the manufacturing-specific steps that make the difference.
Step 1: Design Godowns Around the Factory Floor
Mirror the physical flow of material. A typical small factory needs at least:
- Raw material store
- Production floor (work in progress)
- Finished goods store
- Scrap and rejection area
- Material at job workers, one godown per major subcontractor
If the godowns do not match how material actually moves, stock reports will never match the count.
Step 2: Clean Up Stock Items and Units
Give every raw material, component and finished product one name and one primary unit, with alternate units where needed (for example, rolls and metres, or drums and litres). Duplicated items are the main cause of wrong BOM costs.
Step 3: Build BOMs from the Real Recipe
Sit with the production supervisor, not only the costing team. Include normal wastage as scrap, list by-products, and create alternate BOMs where you regularly substitute materials.
Step 4: Decide How Overheads Are Absorbed
Agree which additional costs (labour, power, factory overheads) are added in the manufacturing journal and at what percentage, and review them each quarter against actual costs.
Step 5: Enable Job Work and Job Costing Where Needed
Set up job work only if you actually send material out or receive it from customers. Enable job costing for made-to-order work.
Step 6: Set Batches and Reorder Levels
Turn on batch and expiry tracking for items that need it, and set reorder levels for critical raw materials with long import lead times.
Step 7: Configure ZATCA E-Invoicing
Configure TallyPrime’s e-invoicing for Saudi Arabia, onboard every invoicing point with ZATCA, and test standard (B2B) invoices, simplified (B2C) invoices and credit notes before go-live. Our ZATCA e-invoicing service covers this end to end.
Step 8: Count Opening Stock by Godown
Do a full physical count by godown, including work in progress and material at job workers, before entering opening balances.
Worked Example: Costing a Production Run with Scrap
Here is an illustrative production run for a small Riyadh plastics packaging factory. The figures are examples only.
BOM for 950 kg of packaging film:
| Component | Quantity | Rate (SAR) | Amount (SAR) |
|---|---|---|---|
| Polyethylene resin | 1,000 kg | 6.00 | 6,000 |
| Colour masterbatch | 20 kg | 25.00 | 500 |
| Packing materials | Lot | 300 | |
| Component cost | 6,800 |
Additional cost added in the manufacturing journal: labour, power and overheads at 15% of component cost = SAR 1,020.
Total production cost: SAR 7,820.
Scrap: 50 kg of trim, allocated 2% of the component cost = SAR 136, valued in the scrap godown.
Cost of finished film: SAR 7,820 minus SAR 136 = SAR 7,684, or about SAR 8.09 per kg for 950 kg.
Without the manufacturing journal, many small factories value finished goods at raw material cost only, SAR 6,800 / 950 kg, or about SAR 7.16 per kg. That understates the true cost by about 11%, and every selling price built on it is too low.
The exact result depends on how you set the overhead and scrap percentages, which is why Step 4 matters.
ZATCA E-Invoicing for Manufacturers
Manufacturers sell mostly to other businesses, so most of their invoices are standard tax invoices that must be cleared by ZATCA before they reach the customer. Credit notes for returned or rejected goods must reference the original invoice and go through the same process.
On 24 July 2026, ZATCA announced Wave 25 of Phase 2, covering taxpayers whose VAT-subject revenue exceeded SAR 187,500 in 2022, 2023, 2024 or 2025. They must integrate with the Fatoora platform by no later than 1 February 2027, about 14 weeks away. Many newly licensed factories fall within this threshold in their first year of sales.
Two manufacturing-specific points to watch:
- Customer rejections: returned or rejected batches need a proper credit note, not an edited invoice.
- Import VAT on raw materials: VAT paid at customs on imported raw materials is generally recoverable through your VAT return, so it should not be added to stock cost.
For the full picture of Phase 2, see our complete guide to ZATCA Phase 2.
Extra Control with TallyPrime Special Edition 3.0
Customers who buy TallyPrime or renew their Tally Software Services through Maas Consult get TallyPrime Special Edition 3.0, a pack of 30 features we build on top of TallyPrime, at no extra cost, subject to licence and TSS status. Several are useful in a factory:
- Negative Stock Control, to stop production or sales from consuming stock that is not recorded
- Userwise Auto Godown Allocation, so storekeepers post to their own godowns
- Voucher Approval System, for approval before key entries are final
- Cost Centre-wise Profit and Loss Account, to compare product lines or plants
The full list is in our TallyPrime Special Edition 3.0 guide.
TallyPrime or ERPNext for Your Factory?
| Your factory | Better fit |
|---|---|
| One or two production stages, under a few hundred products, finance-led team | TallyPrime |
| Made-to-order work costed job by job | TallyPrime with job costing |
| Heavy use of subcontractors for single processes | TallyPrime with job work |
| Multi-stage production with work-in-progress at each stage | ERPNext |
| Need to plan production from sales orders (MRP) | ERPNext |
| Machine capacity, routings and shop-floor tracking | ERPNext |
| Formal quality inspection at receipt and production | ERPNext |
Many factories start on TallyPrime and move later. Our article on signs you have outgrown TallyPrime lists the triggers, and our Tally to ERPNext migration guide explains how to move without losing data.
Common Mistakes Saudi Manufacturers Make with TallyPrime
- Valuing finished goods at raw material cost. Without overheads in the manufacturing journal, product costs and margins are wrong.
- Ignoring scrap. Normal wastage left out of the BOM inflates the cost of finished goods and hides real yield problems.
- One godown for everything. Without separate raw material, WIP, finished goods and job worker godowns, stock reports cannot be trusted.
- Losing track of material at job workers. Sending material out on a delivery note instead of a Material Out voucher means it vanishes from the books.
- Editing invoices for rejected goods. Under ZATCA rules, use a credit note.
- Stretching TallyPrime into production planning. If you are planning production in Excel next to Tally every day, it is time to review the system.
A Hypothetical Example: A Food Factory in the Second Industrial City
Picture a small food manufacturer in Riyadh’s Second Industrial City making packaged snacks for supermarkets. It buys imported ingredients, sends packaging printing to a job worker and sells on credit to retail chains.
Set up properly in TallyPrime, each recipe is a BOM with normal wastage as scrap. Every production shift posts a manufacturing journal with labour and power absorbed as overheads. Ingredients and finished goods carry batch numbers with expiry dates, so the factory can trace any batch a customer questions. Packaging film sent to the printer goes out on a Material Out voucher and returns on a Material In voucher. Invoices to supermarkets are cleared through ZATCA, and returned stock is handled with credit notes.
Two years later, with a second line and a growing product range, the team starts planning production weekly in a spreadsheet. That is the signal to review whether ERPNext’s production planning would now pay for itself.
This is an illustration built from common patterns, not a named client case.
From the Field
In small factories, the biggest gain from TallyPrime rarely comes from a new feature. It comes from finally costing products properly. The first time a factory posts manufacturing journals with real overheads and scrap, at least one product usually turns out to be priced below cost. Fixing that one price often pays for the whole setup.
Frequently Asked Questions
Can TallyPrime be used for manufacturing in Saudi Arabia?
Yes. TallyPrime supports bills of materials, manufacturing journals, by-products, co-products and scrap, job work, job costing, batches and godowns, along with VAT and ZATCA e-invoicing. It suits small and mid-sized factories with straightforward production.
Does TallyPrime have a BOM feature?
Yes. You can create one or several BOMs per item, set the BOM unit, choose source godowns for each component, and include by-products, co-products and scrap.
Can TallyPrime add labour and overheads to production cost?
Yes. The manufacturing journal lets you add additional costs, such as labour, power or factory overheads, as a percentage, so finished goods carry their full production cost.
Does TallyPrime support job work with subcontractors?
Yes. It handles job work both as a principal manufacturer (Job Work Out Orders with Material Out and Material In vouchers) and as a job worker (Job Work In Orders).
Does TallyPrime have MRP or production planning?
No. TallyPrime does not include MRP, production planning, routings or capacity scheduling. Factories that need these should consider a full ERP such as ERPNext.
Can TallyPrime track batches and expiry dates?
Yes. Batch tracking with manufacturing and expiry dates is available, which is useful for food, chemicals and cosmetics manufacturers.
Is TallyPrime ZATCA compliant for manufacturers?
TallyPrime includes e-invoicing for Saudi Arabia. Each invoicing point must be configured, onboarded with ZATCA and tested, including credit notes for returned goods.
When should a factory move from TallyPrime to ERPNext?
When production planning, multi-stage work in progress, machine capacity or formal quality control become daily needs, and the team is running them in spreadsheets alongside TallyPrime.
How long does it take to set up TallyPrime for a factory?
It depends mainly on how many products and BOMs you have and how clean your item data is. Godown design and BOM building take the most time.
Where can we buy TallyPrime in Saudi Arabia?
From an authorised Tally partner. Maas Consult provides TallyPrime licences, setup and support across the Kingdom.
Final Thoughts
TallyPrime will not run a complex plant, and it does not pretend to. But for the many small Saudi factories that need correct product costs, clean stock, traceable batches, control over subcontracted work and ZATCA-compliant invoicing, it does the job well, provided it is set up for manufacturing from day one.
If you are setting up a new factory or getting TallyPrime ready for production, our TallyPrime sales and solutions team can help you choose the right licence and configure it for how your factory actually works.
