How to Set Up and Use Non-Inventory Items in Business Central

Over the course of many, many implementations, there’s often a need to track non-inventory items for a number of valid reasons.   Microsoft Dynamics 365 Business Central gives you an easy way to do just that.  Whether you’re managing small consumables, or low-cost components in a production process, knowing how to set up and use Non-Inventory items correctly can save time and streamline transactions.

This guide walks you through everything you need to know about setting up and using Non-Inventory items in Business Central effectively.

What Are Non-Inventory Items in Business Central?

In Microsoft Dynamics 365 Business Central, every item has a Type field that determines how it’s managed:

• Inventory – Stocked items that affect inventory valuation.  This type is for what most of us consider true inventory.  There’s an entire host of things you’ll need to know to set this up properly and manage inventory as your business requires.
• Service – Non-physical items (like consulting fees) that bypass inventory tracking.  This is more of a labor-type component and isn’t counted as inventory valuation.
• Non-Inventory – These are physical items, but you aren’t holding them in inventory.   You don’t track the quantity on hand, but you are able to purchase, sell, and consume them.  

We’re going to focus from here forward on just the non-inventory item type so we can see the pros and cons and how to use them effectively.

When to Use Non-Inventory Items

OK, so when does it make sense to use non-inventory items.   These are not a replacement for your true inventory items that you should be managing properly.  Instead, these are typically low cost items that don’t need the overhead often necessary with true inventory.  Wtih these items you:

• won’t count them in your inventory valuation.   They commonly go straight to an expense account.
• They’re usually low cost like nuts, bolts, or supplies such as gloves, shrinkwrap, etc.
• You want to track when they’re purchased but will not manage or monitor their consumption.
• Alternatively, you may want to include them for consumption in manufacturing processes.

Now that we know when to use them, let’s look at the setup.

How to Set Up Non-Inventory Items in Business Central

Setting up Non-Inventory items in Business Central is quick and straightforward.  I often recommend using an item template for non-inventory items to make it even more effective. 

Here’s what you’ll need:

1. Create a New Item

2. Select the Type:  Non-inventory

3. Assign the General Product Posting Group 

The only thing necessary here are the sales and purchases accounts.  Of course, you’ll still need all the proper Business Posting Group and Product Posting Group combinations.  I typically see a number of product posting groups for the non-inventory items so you can get to the proper expense account.

4. Link to Vendors or Customers (Optional)

• If you purchase the item, assign a Vendor No.
• If it’s frequently sold, assign Customer Pricing as needed.

A couple of interesting things occur when setting up this type of item. 

Notice the inventory-specific fields like quantity on hand and inventory posting groups are now disabled. The costing method will also default to FIFO. However, it does not actually track FIFO costs.

The unit cost will update after your first purchase but won’t ever update.  You won’t be able to manually update it either.  That’s usually OK but consider this when using in production BOMs.

How to Use Non-Inventory Items in Business Central

OK, they’re all setup.  Now, let’s go use them.  

Purchasing Non-Inventory Items

• Add the Non-Inventory item to a Purchase Order like any regular item.
• The cost posts directly to the assigned expense account dictated by the general posting setup, bypassing inventory valuation.

Selling Non-Inventory Items

• Include them on Sales Orders or Invoices just like standard items.
• Revenue is recognized without affecting inventory stock levels.  There’s no COGS posting either. This is already in your expense account.

Using Non-Inventory Items in Production BOMs

• Why is this useful? Small components (like screws) can be consumed in production without needing full inventory tracking.
• When you add a Non-Inventory item, a few things happen:
  • its unit cost is included in the finished product’s total cost.
  • the item is consumed during production but doesn’t generate inventory transactions.
  • Consumption is based on the flushing method but you won’t have any location code.  Non-inventory items do not follow warehouse rules.

Non-inventory items also work with assemblies and in service management.

What Non-inventory Items in Business Central Does Not Do

As we’ve covered, these are handy, useful tools. They’re great to manage things like consumption. With that understanding, there are things non-inventory items simply won’t do. 

❌ No Warehouse Handling – They can’t be moved between bins or locations.

❌ No Planning Impact – They don’t generate demand and won’t appear in MRP planning.

❌ No Serial or Lot Tracking – Unlike Inventory items, you can’t assign tracking numbers.

❌ Can’t Be Output in Production Orders – They can be consumed but not produced.

❌ No Transfers Between Locations – Unlike Inventory items, they can’t be moved between sites.

Makes sense that you wouldn’t be able to do these things with a non-inventory item, right?

Final Thoughts

OK, there you have it.  A pretty quick guide on using Non-Inventory items in Business Central.  This item type can give businesses a flexible way to track materials without the complexity of full inventory management. Whether you’re managing small production components or expense-based purchases, setting them up correctly ensures cleaner financial reporting, better cost tracking, and less cluttered inventory data.

If you haven’t used non-Inventory items in Business Central yet, consider if now’s the time to start. It might be just what you need.

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