Understanding Inventory, Non-Inventory, and Service Items in Business Central and How They Differ from Service Items in Service Management

When working in Microsoft Dynamics 365 Business Central, one of the most common areas of confusion is the difference between Inventory, Non-Inventory, and Service item types on the Item Card, and how those differ from Service Items in the Service Management module.

Each serves a distinct purpose in how you buy, sell, and manage your company’s goods and services and knowing which one to use ensures accurate costing, reporting, and workflow automation.

Inventory Items

Inventory items represent physical products that are stocked and tracked by quantity. They appear on inventory valuation reports, support bin and warehouse tracking, and update the general ledger when received, consumed, or sold. Typical use cases include manufactured goods, purchased components, or resale parts.

Because they have perpetual tracking, Business Central maintains:

• On-hand quantity

• Unit cost and cost layers

• Item ledger entries and value entries

If you use manufacturing, assembly, or warehousing, inventory items form the foundation of your production and costing structure.

Non-Inventory Items

Non-inventory items are tangible or intangible products that you buy or sell but do not track in stock. They are often used for materials that are inexpensive, drop-shipped, or not practical to manage in the warehouse (for example, nuts, bolts, or subcontracted components).

Business Central still allows you to record cost and revenue for these items, but it skips inventory ledger postings. This makes them lighter and faster to process while keeping financial accuracy.

Service (Item Card Type)

Service items on the Item Card are used when you sell time, labor, or a specific service activity. They do not post to inventory, but they do post sales and cost amounts to revenue and expense accounts. You might use these for installation labor, consulting hours, or maintenance work.

The key advantage of using a Service-type item instead of a G/L account directly is consistency — you can price, report, and analyze them just like physical items, while still excluding them from stock control.

Service Items (Service Management Module)

Service Items in the Service Management area are entirely different. These represent physical assets owned by your customer that you service, maintain, or repair — such as a machine, vehicle, or equipment unit.

Each service item record holds:

• Serial or asset number

• Warranty start and end dates

• Service item group and response times

• Links to service contracts and service history

You don’t sell or purchase these directly; instead, they act as a tracking and control layer for after-sales service, warranties, and field repair activities. When you create a service order, the Service Item tells Business Central what is being serviced, while the Service-type item (from the Item Card) describes what you’re doing — such as labor, inspection, or replacement.

Putting It All Together

Type	Where It Lives	Tracks Quantity	Used For	Appears in Inventory Valuation
Inventory	Item Card	✔️	Physical stocked goods	✔️
Non-Inventory	Item Card	❌	Low-value or drop-ship materials	❌
Service (Item Card)	Item Card	❌	Labor or service work sold	❌
Service Item (Module)	Service Management	N/A	Customer equipment under service	N/A

Final Thoughts

Choosing the correct item type affects everything from costing accuracy to reporting clarity. Inventory items drive physical stock and production, non-inventory items simplify purchasing, and service items (on the item card) support clean service invoicing. Meanwhile, service items in the service module enable lifecycle management for the assets you support.

Understanding how each fits into your Business Central environment ensures your team builds processes that align finance, operations, and service management without overlap or confusion.