Raw Materials Budget: Explanations and Free Template!

budget des matières premières

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The raw materials budget is the one that comes immediately after the production budget. The reason the latter takes precedence is that it is necessary to know the units that need to be produced to establish a raw materials budget.

Thus, by knowing the units to be produced, one can establish the total cost of the raw materials to be purchased, and then one can forecast the total disbursements for the raw materials.

To go further in your organizational methods, the realization of the raw materials budget optimizes the control of your costs.

This article highlights what you need to know, and we are offering a free Excel template for your needs.


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What Is the Raw Materials Budget?


The company plans to make a certain level of sales, which leads it to plan several units to produce, so it must be able to plan the total raw materials to buy.

The raw materials budget makes it possible to forecast the disbursements relating to the purchases of raw materials that will take place during a specific period.

Beginning with the number of units to be produced and ending with the total disbursements to be expected, the raw materials budget is useful for any manufacturing company that ultimately wishes to establish projected financial statements as well as a cash budget.


A budget is a great tool to help you with the purchasing part of your inventory management.

On the other hand, a lot of other challenges like maintaining appropriate inventory levels, warehouse space management, and supply chain issues may need a more sophisticated tool.



Feeling Overwhelmed with Managing Inventory and Sales Orders?


Some businesses may have very simple inventory management needs and may not require the advanced features and functionality offered by inventory software. In these cases, using a manual system or a basic spreadsheet may be sufficient.

On the other hand, businesses with more complicated inventory management needs may find that an inventory software solution is the best option.

inFlow Inventory is the ultimate asset for small and medium-sized businesses. Featuring powerful tools for tracking inventory levels, managing purchase orders, and sales, barcode scanning capabilities, plus reporting & analytics to keep you informed with insights that help you make better business decisions.

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How to Do a Raw Materials Budget?


Several elements are necessary to establish an optimal raw materials budget.

Generally, making a raw materials budget involves forecasting the total raw material needs and then establishing the cost of the raw materials to be purchased. The unit cost of raw materials, along with the desired percentage of end inventory, must be defined to establish the cost of raw materials to be purchased.

Finally, we draw up a provisional disbursement plan which is established according to the supplier payment time for the accounts payable.

So, we have prepared a Free Excel file that allows you to integrate all the data necessary to calculate this budget automatically.

The rest of this article shows the steps needed to budget for raw materials over 12 months.


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Define the Units to Be Produced


raw materials budget 1

The image above shows only 4 months of a full year. Note that some boxes are yellow. These are the only boxes you have to fill in the free Excel file that we offer. As we mentioned earlier, the units to be produced are defined through the establishment of a production budget.



Know the Raw Materials Needed per Unit


The raw materials needed per unit are within your knowledge and experience of your production of a unit. You can easily get more optimized data by using an inventory management tool like inFlow inventory. You can see our review of inFlow software for more details.

Thus, by multiplying the units to be produced with the necessary raw materials per unit, we obtain the need for production in units of raw materials. If the design of one of your finished products requires several raw materials, then we recommend that you use several sheets of the free Excel file. It will be quite simple, to sum up, each of the components afterward.



Count the Stocks of Raw Materials in Inventory at the Beginning of the Period


It will be quite simple for you to go around your inventories to calculate the number of units of raw materials remaining in your inventory. Thus, the total number of units in inventory will be integrated into the yellow box of raw material inventories at the beginning of the first budgeted month.


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Establish Unit Cost and Desired Percentage of Ending Inventory


raw materials budget 2


The percentage of ending stocks must be established. This one depends on your thinking about what stocks you should hold at the end of a period. The Excel file uses the desired % of ending stocks by multiplying it by the production requirement for the following month. Thus, we see that the first image presented above shows the desired commodity stock at the end of 16,000 units in the first month. This 16,000 is the result of the second month’s production requirement (160,000 units) multiplied by the desired percentage of ending stocks (10%).

Next, the unit cost of the raw materials is defined. Again, this amount depends on knowing your industry and your cost data. By integrating this cost in the box for this purpose, the cost of the raw materials to be purchased will be calculated. Thus, you are now in a position to know what the cost of the raw materials to be purchased will be during a certain period, in addition to being able to start calculating forecast disbursements.



Establish Supplier Payment Deadlines


raw materials budget 3


How long does it take before you pay your suppliers? The image above allows you to establish the delays in percentage according to several periods. This will allow the automatic calculation of disbursements relating to the purchase of raw materials as presented in the next step. Looking at the image of the next step, we notice that the payments of the accounts payable at the beginning are established automatically except for certain boxes in yellow. Those that are established automatically depend on another sheet included in the file, that is to say, the sheet “Starting balance sheet”. In this sheet, include in current liabilities your most recent accounts payable item and the other page will be filled automatically according to the payment terms established in percentages.

Then, the boxes in yellow relating to the accounts payable at the beginning are those which make it possible to establish payments envisaged of more than 150 days. Complete these boxes only if the accounts payable on your most recent financial statements are partially or fully paid after 150 days.



Analyze the Forecast Disbursements Relating to the Purchase of Raw Materials


raw materials budget 4



The image above is small since it encompasses the entire 12-month commodity disbursement forecast. You will find everything more clearly in the free Excel file. To show an extract of what this part represents with a clearer image, we present it to you over 4 months below:


raw materials budget 5


You can quickly see the disbursements relating to purchases for each period. Let’s take the example of month 2. This shows that $557 is disbursed for purchases made in the first month, while $486 is paid to suppliers for raw material purchases in the second month. The numbers are random, but yours would be close to reality.


Free Raw Materials Budget
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Looking for an Easier Way to Manage your Business’s Inventory?


Using an intuitive interface makes managing inventory simple so you can focus more on growing your business rather than worrying about where you stand with each order or sale made in-store!

Nowadays, your business needs a software solution. inFlow Inventory is specifically designed for businesses of all sizes that need to track their inventory levels, sales, and purchase orders, and generate reports about those key metrics.

See how easy it is to stay on top of your warehouse operations with InFlow Inventory Software.


You can see our review of inFlow software for more details.



The Logical Follow-Up to the Raw Materials Budget


At this stage, you should have completed the sales budget, the production budget, and now the raw materials budget. Now two other budgets flow from the production budget. This is the direct labor budget, as well as the indirect manufacturing costs.

If you have already completed the two previous budgets, then you must complete the finished goods inventory budget at the end, as well as the selling and administrative expenses budget.

The whole of the work will allow you to establish the cash budget.



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