Inventory management features in Dynamics 365 Business Central

Modern supply chains require companies to handle their inventory accurately, maintain clear oversight, and adapt quickly to changes. Holding too much stock ties up cash and increases risk of obsolescence, while insufficient inventory leads to missed sales and unhappy customers. That’s why modern ERP platforms such as Dynamics 365 Business Central matter, they enable businesses to combine financials, operations and inventory into a unified platform. In this blog we’ll explore what inventory management looks like in Business Central, how you benefit, the capabilities it provides, answer frequently asked questions and walk you through next steps.

Inventory management in Business Central refers to the set of processes, features and analytics that allow you to manage physical products you trade in—from item setup, tracking movements and adjustments, to financial posting and analytics. You begin by creating an item card for each physical product you stock. In the system, inventory increases and decreases are automatically recorded when you post purchase and sales documents, or you can post directly to item ledger entries after a physical count or adjustment.

Furthermore, inventory analytics are built into the solution to give you visibility into item availability, valuation, movement and cost. Inventory management also includes tracking items by location, lot, serial number and linking to financial ledgers so that your on-hand inventory value is posted correctly and reconciled. In short: Business Central’s inventory management capability is a comprehensive way to control stock, connect it with finance and give you insight into your inventory performance.

Implementing inventory management in Business Central brings several important benefits:

• Improved visibility and control: With item cards, categories, attributes and analytics, you can classify and search inventory more easily. Business Central supports item tracking by serial or lot numbers, traceability, location transfers and transparency of stock movement. Real-time insight into stock levels and item availability helps you reduce bottlenecks and fulfil orders more reliably.
• Financial accuracy and reconciliation: Inventory transactions in Business Central automatically post costs to the general ledger (GL) in appropriate accounts (inventory account, adjustment account, cost of goods sold). This integration ensures that your stock value and cost recognition are tied to your finance system, reducing manual reconciliation and risk of discrepancy.
• Analytics-driven decision making: The platform includes built-in reports and supports ad-hoc analysis and Power BI apps for inventory. This empowers you to monitor key performance indicators (KPIs), evaluate top-selling items, track aged stock, perform trend analysis and act proactively.
• Efficient operations and process standardization: Business Central supports inventory movements between locations, item transfers, adjustment postings, lot/serial tracking and many other operational tasks. Having these capabilities built into your ERP simplifies workflows, reduces workarounds and enhances process standardization.
• Scalability and multi-location support: You can manage stock across different sites or locations, set up transfer routes and define inventory behavior per location. As your business grows, you maintain control and visibility across a broader footprint.

Business Central delivers comprehensive inventory management features, from detailed item setup and real-time tracking to built-in analytics and financial integration. Its robust capabilities help businesses maintain control, accuracy, and visibility across all aspects of their stock and operations. Below is a list of key capabilities in Business Central that enable effective, data-driven inventory management and operational control:

Establishing accurate and detailed product data is essential for operational consistency. Business Central enables businesses to define their inventory structure through flexible item setup and categorization tools that streamline purchasing, sales, and reporting.

How it works:

• Create item cards that store product details such as description, costing method, unit of measure, and item category.
• Assign attributes (for example, color, size, or brand) to filter and analyze products easily
• Use item categories to group similar products for financial reporting and analytics.
• Configure stockkeeping units (SKUs) to track the same item across different locations or vendors with unique parameters.

Day-to-day stock movements are automatically captured and reflected in real time, giving users confidence that system data always mirrors physical inventory. Business Central records increases and decreases in inventory as part of standard operational workflows.

How it works:

• Inventory quantities automatically update when posting sales, purchase, or assembly transactions.
• Use item journals to manually record adjustments for damaged goods, returns, or lost stock.
• Perform physical inventory counts to reconcile on-hand balances with real-world quantities.
• Access item ledger entries and value entries to review all movements and related costs.

For organizations managing multiple warehouses or retail locations, Business Central provides built-in tools to track transfers, balance inventory, and ensure smooth stock flow between facilities.

How it works:

• Define multiple locations to represent each warehouse, store, or distribution center.
• Create transfer orders to move items between sites while maintaining full traceability.
• Record in-transit inventory to track goods during transfer and maintain visibility until receipt.
• Reclassify inventory items between bins, variants, or dimensions as needed.

Traceability is key for industries with quality assurance or regulatory requirements. Business Central enables complete visibility into each item’s journey—from procurement through sale—using lot and serial tracking.

How it works:

• Assign serial or lot numbers to items at purchase, production, or shipment.
• Review item tracking entries to identify the origin and movement of any product.
• Support product recalls or compliance audits with detailed traceability reports.
• Combine tracking with location data to know exactly where each item is stored or used.

Business Central links every inventory movement to its financial impact. With flexible costing methods and automatic ledger integration, you gain a clear, accurate view of inventory value and profitability.

How it works:

• Choose from costing methods such as FIFO, Average, Standard, or Specific to suit your business needs.
• Automatically post cost adjustments to the general ledger to maintain reconciliation.
• View item value entries to understand how costs flow through purchase, production, and sale.
• Generate inventory valuation reports for month-end closing and audit purposes.

Turning data into insight is essential for effective inventory control. Business Central provides pre-built reports and analytics dashboards that transform operational data into actionable intelligence.

How it works:

• Access built-in reports such as inventory valuation, item age composition, and top 10 list to monitor trends.
• Use ad-hoc analysis and filtering tools on list pages to explore item performance or stock movement.
• Integrate with Power BI for visual dashboards displaying stock turnover and profitability metrics.
• Track KPIs like slow-moving stock, aged inventory, or item profitability in real time.

Leverage built-in AI and Copilot features to move from descriptive to predictive inventory management — helping your team act proactively rather than reactively.

How it works:

• Use natural-language interaction with Copilot: you can ask questions like “Which items are likely to stock-out next month?” or “What excess inventory do we have in Location A?” and receive contextual results.
• AI-powered suggestions for optimal reorder points, safety stock levels or alternative suppliers based on historic demand, cost, lead times and trends.
• Automation of routine tasks like inventory allocations, transfer suggestions or adjustments triggered by thresholds: reducing manual effort and risk of errors.

To expand the built-in functionality of Microsoft Dynamics 365 Business Central, Rand Group offers a suite of apps designed to improve inventory visibility, costing accuracy, and stock control. These extensions add automation and intelligence to help businesses manage inventory more efficiently and confidently.

Key apps include:

• Item Attributes – Simplify product management by assigning and analyzing up to 500 unique attributes per item. This enables advanced categorization, easier reporting, and better insight into product performance.
• Landed Cost Validator – Improve costing accuracy by automatically calculating and validating landed costs such as freight, duties, and insurance before posting. This ensures your inventory valuation reflects the true cost of goods.
• Inbound Container Handling – Gain visibility into goods in transit by grouping multiple purchase orders into a single container record. Track estimated arrival dates and improve coordination between purchasing and warehouse teams.
• Automated Order Management – Streamline fulfillment by automatically allocating stock based on customer or item priority, improving order accuracy and reducing manual effort.
• Reservation Enhancer – Take control of inventory commitments by adjusting reserved quantities, prioritizing orders, and avoiding over-reserving scenarios.

When it comes to deploying and maximising inventory management in Business Central, partnering with the right implementation and advisory firm makes all the difference. Here’s why Rand Group stands out:

• Deep Dynamics expertise: As a seasoned partner specialising in the Microsoft-Dynamics ecosystem, Rand Group understands the nuances of inventory, supply chain and financial integration.
• End-to-end support: From initial scoping to configuration, training and post-go-live support, Rand Group provides the full lifecycle of service to ensure you realise value.
• Inventory-centric mindset: With inventory management as a core focus for many of our clients, Rand Group brings domain knowledge of industry best-practices around item classification, costing, analytics and multi-location movements.
• Insight-driven transformation: Leveraging Power BI and Business Central analytics, Rand Group helps organizations move from reactive to predictive inventory management.
• Commitment to partnership: With a 90% client retention rate, Rand Group builds long-term relationships grounded in trust, transparency, and results.

With Rand Group as your partner, you’re not just adopting software—you’re evolving your inventory operations into a strategic asset.

1. Can Business Central manage inventory across multiple warehouses or locations?
   Yes. You can set up locations and transfer routes, and manage inventory per location.
2. How does Business Central handle item costing and inventory valuation?
   Business Central supports setup of costing methods, cost adjustments, and automatic posting of item value entries to the general ledger so your inventory subledger aligns with finances.
3. Does Business Central provide analytics for inventory such as ageing, top-selling items or stock outs?
   Yes. There are built-in reports such as Inventory – Top 10 List, Item Age Composition, Inventory Order Details, Inventory Transaction Detail, and you can use the Power BI Inventory app for KPIs and dashboards.
4. Can I track individual items by lot or serial number?
   Yes. Business Central supports item tracking using serial numbers, lot numbers or package numbers, and you can trace item-tracked items through the supply chain.
5. Does Business Central include analytics and reports for inventory performance?
   Yes. Built-in reports and Power BI integration enable analysis of stock turnover, item age, and top-selling products, helping you make data-driven decisions.

Business Central provides a comprehensive inventory management solution that connects operations, stock control and finance. By using the item setup, transaction tracking, costing, analytics and multi-location features, you’ll gain visibility, control and insight—and that translates to lower cost, higher customer satisfaction and stronger growth. By partnering with Rand Group, you’ll ensure your inventory management doesn’t just work, it thrives. Contact us today to get started.