Inventory, Non-Inventory, or Service? Choosing the Right Item Type in Business Central

When Navision arrived in Italy back in 1998, every company that sold or purchased services faced the same question:

How should services be managed in the system?

At the time, the item master data was designed exclusively for physical goods. Aside from using the Resource master—which was suitable only in certain cases—the only alternative was to post directly to general ledger accounts. But that came with a major drawback: general ledger accounts don’t support pricing. This meant that every sales or purchase price for a service had to be entered manually in each document—leaving room for error.

As a workaround, some partners used the Item master data even for services. But this led to a key problem: each sale or purchase posted inventory movements.

This caused two critical issues:

• Services were wrongly included in inventory valuation;

• Selling a service before purchasing it led to negative inventory.

Starting with NAV 2016, Microsoft introduced the “Type” field in the item master, allowing users to distinguish tangible goods from services—and adding a third option: Non-Inventory.

Let’s look at what each option means, and more importantly, what you can (and can’t) do with it in Business Central.

Inventory

The “Inventory” type is used for tangible goods that require full inventory tracking.

Items set with this type can be used in all Business Central operations without limitation: purchasing, sales, transfers between locations, physical inventory counts, production (consumption and output), planning, warehouse logistics, revaluation, adjustments, and more.

These items are tracked both in quantity and value, and they contribute to inventory valuation. This makes them suitable for all goods that must be managed across the supply chain and reflected in financial reporting.

Non-Inventory

The “Non-Inventory” type is designed for low-cost physical items that are typically consumed immediately and do not need to be tracked as inventory.

Even so, in Business Central, these items can still:

• be purchased and sold;

• be included in production or assembly BOMs, and therefore consumed during production or service operations;

• contribute to the standard cost calculation of finished or semi-finished products, depending on the setup.

When you purchase and consume a Non-Inventory item, Business Central still posts both quantity and value movements:

• in the Item Ledger Entry, the quantity movement is recorded, but the on-hand inventory remains zero;

• in the Value Entry, the cost is posted under “Cost Amount (Non-Invtbl.)”, so the value is tracked analytically but does not impact inventory valuation.

⚠️ Use with caution

Since Non-Inventory items do not affect stock valuation and cannot be tracked for availability, they should be used carefully.

Using this type for goods that are sold to customers or play a significant role in production may lead to inconsistencies in:

• inventory visibility,

• cost tracking,

• and financial reporting.

Before choosing this type, consider whether the item:

• requires stock control,

• contributes materially to your product cost,

• or needs to appear in inventory-related reporting.

🚫 Operations not available

Because Business Central does not maintain on-hand quantity for Non-Inventory items, several operations are not supported:

• Transfers between locations

• Physical inventory counting

• Revaluations

• Picking and put-away in warehouse management

• MRP-based automatic purchase planning

✅ Typical use cases

Here are some examples of items that are well suited to the Non-Inventory type:

• Screws, cable ties, or other small parts used during installation

• Welcome kits or promotional giveaways

• Empty boxes, generic packaging, or bags

• Labels, shipping tape, or packing materials

• Printed manuals, forms, or in-house documents

• Occasional office supplies (e.g. printer cartridges)

Assistenza (Servizio)

The “Service” item type is used to represent intangible goods, that is, services a company can sell or purchase.

🔄 Don’t confuse this with the Service module

Service-type items are not related to the Service Management module, which handles “Service Items” (i.e., physical products under maintenance or repair). Instead, these items are used to manage activities such as:

• consulting,

• transport,

• installation,

• subcontracted services.

⚙️ What you can do with Service items

Service-type items can be:

• sold through sales documents;

• purchased from vendors;

• used in project planning, for example in job planning or budgeting lines.

As with Non-Inventory items, Business Central records:

• quantity and value in the ledger entries,

• but does not maintain inventory levels (on-hand quantity stays at zero),

• and does not include them in inventory valuation.

✅ Conclusion: choosing the right item type makes all the difference

The Item Type field in Business Central may seem like a small setting, but it has a big impact on how items behave in the system—from inventory tracking to costing, planning, and reporting.

Here's a quick comparison:

Item Type	Inventory tracking	Affects inventory value	Usable in production	Buy/Sell	Use case
Inventory	✅ Yes	✅ Yes	✅ Yes	✅ Yes	Physical goods requiring full stock control
Non-Inventory	⚠️ Limited	❌ No	✅ Yes (with limits)	✅ Yes	Low-value consumables, minor materials
Service	⚠️ Limited	❌ No	❌ No	✅ Yes	Intangible services (e.g. consulting)

Choosing the right type is not just a technical detail—it affects inventory accuracy, cost calculation, and operational consistency.

Business Central gives you flexibility, but with that comes responsibility:

✔️ Understand how each type works,

✔️ Match it to the real-world use of the item,

✔️ And be mindful of downstream effects on processes and reporting.

When in doubt, pause and evaluate the nature of the item and how it fits into your business flow. That’s the best way to keep your setup clean and your data reliable.