Enabling Physical Negative Inventory in Dynamics 365 Finance and Operations 

In inventory management, there often arises a need for flexibility, especially when dealing with orders that exceed current stock levels. Dynamics 365 Finance and Operations offers a solution to this challenge through enabling physical negative inventory.  

This functionality allows organizations to create sales orders even when inventory levels are insufficient, catering to scenarios where a stock may be incoming or when manufacturing units are involved. 

Purpose of Physical Negative Inventory: 

Some organizations encounter situations where they must fulfil customer orders despite lacking sufficient inventory on hand. This could be due to various reasons such as pending stock arrivals or the need to initiate manufacturing processes upon order placement.  

Enabling physical negative inventory facilitates the creation of sales orders under such circumstances, ensuring business continuity and customer satisfaction. 

Process to Enable Negative Inventory: 

Enabling physical negative inventory involves configuring settings within Dynamics 365 Finance and Operations. This can be achieved through the following steps: 

Navigate to Inventory Management > Setup > Inventory > Item Model Group. 

Within the Item Model Group, allow for physical negative inventory. 

For further insights into this process, refer to our previous blog post on https://www.cloudfronts.com/blog/d365-enterprise/d365-finance-operations/physical-negative-inventory-dynamics-365-operations/ can provide additional guidance. 

Necessary Steps to Manage Physical Negative Inventory: 

Once physical negative inventory is enabled, it’s essential to adopt proper procedures for its management to maintain accuracy and efficiency.  

• Ensure Availability of Physical Inventory during Shipment: Before shipping any items, verify the presence of physical inventory in stock. Only proceed with the shipment if the required items are physically available. 

• Transfer Stock if Necessary: If the required stock is not available at the shipping warehouse but exists in the main warehouse, initiate a transfer process to move the items accordingly and receive that in a shipping warehouse. 

• Periodic Inventory Closing: Implement regular inventory closing procedures to ensure accurate inventory valuations. 

Issues Faced by Organizations if Proper Procedures Are Not Followed: 

Failure to comply with the proper procedures can lead to various issues, including: 

Invalid Cost Value of Items: This can result in an inaccurate inventory valuation, subsequently affecting main accounts and profit estimation. 

In conclusion, by following these steps, organizations can effectively manage physical negative inventory within Dynamics 365 Finance and Operations, ensuring smooth operations and accurate inventory valuations. 

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