System Configuration & Setup: Building Your Business Central Foundation

Part 3 of 8 in the Business Central Implementation Series

Published: December 2025 | Reading Time: 16 minutes

Introduction

With requirements gathered and processes mapped, you're ready to transform planning into reality through Business Central configuration. This phase is where your implementation truly takes shape—transforming a blank Business Central environment into a tailored system that reflects your organization's unique structure, processes, and requirements.

System configuration is both an art and a science. While Business Central offers tremendous flexibility through its extensive configuration options, making the right choices requires deep understanding of both the system's capabilities and your business needs. Proper configuration establishes the foundation for data quality, process efficiency, and user productivity throughout your Business Central journey.

This comprehensive guide walks you through essential configuration areas, providing practical guidance, best practices, and real-world insights to help you build a solid Business Central foundation.

Environment Setup: Establishing Your Business Central Landscape

Before diving into configuration, establish the appropriate environment structure.

Understanding Business Central Environments

Environment Types:

Sandbox Environments:

• Purpose: Development, testing, training, and experimentation

• Characteristics: Isolated from production, can be reset, copy of production data

• Use cases:

  • Initial configuration and testing

  • User acceptance testing

  • Training environment for new users

  • Testing updates before applying to production

  • Proof-of-concept for new features

Production Environment:

• Purpose: Live business operations

• Characteristics: Protected, backed up, high availability

• Use case: Day-to-day business transactions and reporting

Environment Strategy Best Practices:

Recommended Approach:

1. Development Sandbox: Initial configuration and customization development

2. Testing Sandbox: Validation and user acceptance testing

3. Training Sandbox: User training with realistic data

4. Production: Live operations

Environment Management:

• Maintain consistency between sandbox and production configurations

• Regularly refresh sandbox environments with production data (anonymized if needed)

• Test all configuration changes in sandbox before production deployment

• Document differences between environments

• Establish promotion procedures from sandbox to production

Initial Company Setup

Business Central operates with one or more companies within an environment.

Company Information Setup:

Navigate to Company Information page to configure:

Basic Information:

• Company name and legal entity details

• Address and contact information

• Tax registration numbers (VAT, GST, EIN)

• Industry classification

• Fiscal year structure

Country/Region Settings:

• Primary operating country/region

• Localization features enabled

• Currency and language defaults

• Date and number formats

Communication Settings:

• Email configuration

• Phone and fax numbers

• Website and social media links

Bank Information:

• Primary bank account details

• SWIFT/BIC codes

• IBAN information

• Payment file format preferences

General Ledger Setup: The Financial Core

The general ledger is Business Central's financial heart—configuration here impacts all financial transactions.

Chart of Accounts Configuration

Your chart of accounts provides the structure for all financial recording and reporting.

Chart of Accounts Design Principles:

Structure and Numbering:

• Use logical, hierarchical numbering schemes

• Leave gaps for future account additions

• Group similar accounts together

• Align with statutory reporting requirements

Example Numbering Structure:

Account Configuration Fields:

For each G/L account, configure:

Basic Information:

• Account number and name

• Account category (Assets, Liabilities, Equity, Income, COGS, Expense)

• Account subcategory (for financial statement mapping)

• Income/Balance sheet indicator

Posting Configuration:

• Direct posting allowed (Yes/No)

• Account type (Posting, Heading, Total, Begin-Total, End-Total)

• Totaling range (for summary accounts)

Default Settings:

• Gen. posting type (blank, Purchase, Sale)

• Gen. business posting group

• Gen. product posting group

• VAT business posting group

• VAT product posting group

Reporting and Analysis:

• Default dimensions

• Cost type number (for cost accounting)

• Consolidation account (for multi-company reporting)

Best Practices:

• Start with standard chart of accounts for your country/region

• Customize thoughtfully based on reporting needs

• Limit direct-posting accounts to necessary detail level

• Use account categories correctly for financial statement mapping

• Document account purpose and usage guidelines

Dimensions and Analysis Views

Dimensions enable multidimensional financial analysis beyond the chart of accounts.

Understanding Dimensions:

Dimensions provide additional categorization for transactions:

Common Dimension Uses:

• Department: Finance, Sales, Operations, IT

• Cost Center: Functional areas within departments

• Project: Tracking costs and revenues by project

• Location: Physical locations or branches

• Product Line: Grouping by product categories

• Customer Segment: Retail, wholesale, enterprise

Dimension Configuration:

Creating Dimensions:

1. Define dimension codes (e.g., DEPT, PROJECT, LOCATION)

2. Create dimension values within each dimension

3. Establish value hierarchies for rollup reporting

4. Set up dimension combinations (allowed/blocked)

Default Dimensions:

Configure defaults to automatically assign dimensions:

• By G/L account: Certain accounts default to specific dimensions

• By customer: Sales transactions inherit customer dimensions

• By vendor: Purchase transactions inherit vendor dimensions

• By item: Inventory transactions inherit item dimensions

• By resource: Service transactions inherit resource dimensions

Dimension Value Posting:

• Code Mandatory: Transaction must have a dimension value

• Same Code: All lines must use the same dimension value

• No Code: Dimension cannot be used

• Blank: Dimension is optional

Analysis Views:

Create customized analysis views for reporting:

• Select up to 4 dimensions per analysis view

• Define update frequency (real-time vs. scheduled)

• Filter by date range or other criteria

• Use for ad-hoc analysis and reporting

Best Practice Recommendations:

• Limit to 2-4 global dimensions (more makes posting cumbersome)

• Use shortcut dimensions for frequently used dimensions

• Establish naming conventions for dimension values

• Train users on dimension importance and proper usage

• Review dimension usage regularly for data quality

Posting Groups Configuration

Posting groups determine which G/L accounts are used for various transaction types.

Posting Group Types:

General Posting Groups:

Link business transactions to G/L accounts:

General Business Posting Groups:

• Categorize customers, vendors, and business entities

• Examples: DOMESTIC, EU, EXPORT, INTERCOMPANY

General Product Posting Groups:

• Categorize items, resources, and G/L accounts

• Examples: GOODS, SERVICES, RAW-MAT, FINISHED-GOODS

General Posting Setup Matrix:

For each combination of business + product posting group, define:

• Sales account

• Sales credit memo account

• Sales line discount account

• Sales invoice discount account

• Purchase account

• Purchase credit memo account

• Purchase line discount account

• Purchase invoice discount account

• COGS account

• Inventory adjustment account

Customer Posting Groups:

• Receivables account

• Service charge account

• Payment discount debit account

• Payment discount credit account

• Invoice rounding account

• Additional fee account

• Interest account

• Payment tolerance debit account

• Payment tolerance credit account

Vendor Posting Groups:

• Payables account

• Service charge account

• Payment discount debit account

• Payment discount credit account

• Invoice rounding account

• Application rounding account

• Payment tolerance debit account

• Payment tolerance credit account

Inventory Posting Groups:

• Inventory account

• Inventory account (interim)

• Invt. accrual account (interim)

• COGS account

• Material variance account

• Capacity variance account

• Subcontracted variance account

• Cap. overhead variance account

• Mfg. overhead variance account

VAT/Tax Posting Groups:

Configure tax calculation and posting:

VAT Business Posting Groups:

• Customer/vendor tax status

• Examples: DOMESTIC, EU, EXPORT, TAXEXEMPT

VAT Product Posting Groups:

• Item/service tax treatment

• Examples: STANDARD, REDUCED, ZERO, EXEMPT

VAT Posting Setup:

• VAT calculation type (Normal, Reverse Charge, Full VAT, Sales Tax)

• VAT rate percentage

• Sales VAT account

• Purchase VAT account

• Reverse charge VAT account

• VAT identifier for reporting

Configuration Best Practices:

• Start simple with minimal posting groups

• Expand as business complexity requires

• Document each posting group's purpose

• Test posting group configurations thoroughly

• Create a posting group reference guide for users

Number Series Setup

Number series control automatic numbering for transactions and master records.

Number Series Configuration:

Common Number Series:

• Customers, Vendors, Items, Fixed Assets (master data)

• Sales Quotes, Orders, Invoices, Credit Memos

• Purchase Quotes, Orders, Invoices, Credit Memos

• General Journal batches and vouchers

• Bank payments and receipts

• Transfer orders

• Production orders

Number Series Design:

Elements:

• Starting Number: First number in the sequence

• Ending Number: Last number in the sequence (optional)

• Increment-by No.: Typically 1, can be larger for spacing

• Warning No.: System warns when approaching end

• Default Nos.: Automatically assign next number

• Manual Nos.: Allow manual number entry

• Date Order: Enforce chronological numbering

Example Design:

Number Series Relationships:

• Link related documents (quote → order → invoice)

• Define document number inheritance

• Enable conversion tracking

Best Practices:

• Use descriptive prefixes for easy document identification

• Plan for sufficient capacity (avoid running out of numbers)

• Consider year-based series for easier archiving

• Test number assignment in sandbox first

• Establish conventions for manual numbering when allowed

• Document numbering schemes for user reference

User Setup and Permissions Management

Proper security configuration protects data integrity and ensures appropriate access control.

User Authentication and Setup

User Account Creation:

For each user, configure:

• User name (email address for Microsoft 365 integration)

• Authentication method (Microsoft 365, Azure AD)

• License assignment (Essentials, Premium, Team Member, Device)

• Profile/role center assignment

• Language and localization preferences

• Time zone

User Groups vs. Permission Sets:

Business Central offers flexible permission management:

Permission Sets:

• Collections of permissions to objects and data

• Granular control over read, insert, modify, delete, execute

• Standard permission sets provided (SUPER, BASIC, D365 FULL ACCESS, etc.)

• Custom permission sets for specific needs

User Groups (older approach):

• Collections of permission sets

• Still functional but deprecated in favor of direct permission set assignment

Standard Permission Sets:

SUPER: Complete system access (use sparingly, typically admins only)

D365 BUS FULL ACCESS: Full business user access without system administration

D365 BUS PREMIUM: Premium license capabilities

D365 FULL ACCESS: Complete access to all business features

D365 READ: Read-only access to all business data

Role-specific permission sets:

• Accountant

• Accounts Payable Administrator

• Accounts Receivable Administrator

• Sales and Relationship Manager

• Purchasing Agent

• Inventory Manager

• Project Manager

• Manufacturing User

Permission Set Design

Creating Custom Permission Sets:

Design permission sets aligned with job functions:

Permission Set Structure:

1. Identify role and responsibilities

2. Determine required pages, reports, and tables

3. Define permission levels (Read, Insert, Modify, Delete, Execute)

4. Test thoroughly with actual users

5. Document permission set purpose and contents

Example: "Accounts Payable Clerk" Permission Set:

Required access:

• Read access: Vendors, G/L accounts, items

• Insert/Modify/Delete: Purchase invoices, purchase orders (limited)

• Execute: Payment journals, vendor reports

• No access: Sales documents, customer information, payroll

Permission Set Best Practices:

• Follow principle of least privilege (minimal necessary access)

• Create role-based permission sets, not person-based

• Combine permission sets rather than creating monolithic sets

• Regularly review and audit user permissions

• Test permission sets in sandbox before production deployment

• Document what each custom permission set provides

Segregation of Duties

Configure Business Central to enforce appropriate control separations:

Common Segregation Requirements:

• Purchase requisition vs. purchase order approval

• Payment preparation vs. payment authorization

• Journal entry vs. journal posting

• Customer master data maintenance vs. credit limit approval

• Inventory adjustment entry vs. approval

Approval Workflows:

Implement workflows to enforce segregation:

• Purchase document approval by amount threshold

• Journal batch approval before posting

• Customer credit limit changes requiring approval

• Payment journal approval workflows

• Master data change approval

Role Centers Customization

Role centers provide personalized, role-specific home pages for users.

Standard Role Centers:

Business Central includes pre-configured role centers:

• Business Manager

• Accountant

• Bookkeeper

• Sales and Relationship Manager

• Purchasing Agent

• Production Planner

• Warehouse Manager

• Project Manager

Role Center Components:

Activities Tiles:

• Key metrics and counts (pending orders, overdue invoices)

• Clickable for drill-through to details

Action Items:

• Workflows requiring attention

• Approvals pending

Cues:

• Visual indicators (red/yellow/green) for KPI status

Reports and Charts:

• Embedded analytics

• Graphical representations of key data

Quick Access:

• Frequently used pages and reports

• Recently viewed records

Customization Options:

Page Personalization: Users can customize their own pages:

• Rearrange tiles and sections

• Show/hide fields and columns

• Resize areas

• Add frequently used actions

• Change list views and filters

Profile Configuration (Administrator):

• Design role-specific page layouts

• Define default views and filters

• Configure embedded analytics

• Establish page customizations for all users in a role

Best Practices:

• Start with standard role centers

• Customize based on actual user feedback

• Balance information density with clarity

• Include role-relevant KPIs in prominent positions

• Provide training on personalization capabilities

• Periodically review role center effectiveness

Currency and Exchange Rates

Configure multi-currency capabilities for international operations.

Currency Setup:

Local Currency (LCY):

• Primary reporting currency

• Defined in General Ledger Setup

• Typically company's home country currency

Additional Currencies:

For each additional currency, configure:

• Currency code (USD, EUR, GBP, etc.)

• Currency symbol and description

• ISO currency code

• Decimal places for amounts

• Invoice rounding precision

• Amount rounding precision

Exchange Rates:

Maintain exchange rate tables:

• Starting date for each rate

• Exchange rate amount

• Relational exchange rate amount

• Adjustment exchange rate

• Relational adjustment exchange rate

Exchange Rate Adjustment:

Configure automatic adjustment processes:

• Frequency (monthly, quarterly)

• Accounts to adjust (customers, vendors, bank accounts)

• Unrealized gain/loss accounts

• Realized gain/loss accounts

Additional Reporting Currency:

Enable dual-currency reporting:

• Maintain balances in both LCY and additional reporting currency

• Useful for consolidation or statutory reporting requirements

• Configure conversion rules and rounding

Best Practices:

• Update exchange rates regularly (daily for high-volume operations)

• Establish process for rate source and approval

• Reconcile exchange rate differences regularly

• Document exchange rate adjustment procedures

• Consider integration with financial data providers for automatic rate updates

VAT/Tax Setup

Proper tax configuration ensures compliance and accurate reporting.

VAT/Tax Configuration Areas:

VAT/Tax Business Posting Groups:

• Domestic customers/vendors

• EU customers/vendors (for EU companies)

• Export customers

• Tax-exempt entities

VAT/Tax Product Posting Groups:

• Standard-rated goods/services

• Reduced-rate items

• Zero-rated items

• Exempt items

VAT/Tax Posting Setup:

For each business + product combination:

• VAT calculation type:

  • Normal VAT

  • Reverse charge VAT

  • Full VAT

  • Sales tax (US/Canada)

• VAT rate percentage

• Sales VAT account (output VAT)

• Purchase VAT account (input VAT)

• Reverse charge VAT account

• VAT identifier for reporting purposes

• Certificate of Supply required

• Tax category (for electronic invoicing)

VAT/Tax Registration Numbers:

• Validate format for registration numbers

• Configure EU VAT validation service

• Set up foreign tax registration numbers for multiple jurisdictions

VAT/Tax Reporting Configuration:

• VAT statement templates for statutory returns

• VAT return periods

• Electronic filing setup (where applicable)

• Intrastat reporting (EU)

• EC Sales List configuration

Sales Tax (US/Canada):

For sales tax jurisdictions:

• Tax areas (states, provinces, counties, cities)

• Tax groups

• Tax details with rates

• Tax jurisdiction hierarchy

• Tax liability accounts

Best Practices:

• Verify tax configuration with accounting team and tax advisors

• Test tax calculation in sandbox before production use

• Maintain documentation of tax treatment by product category

• Regularly review tax rates for updates

• Establish procedures for tax authority remittance

• Keep audit trail of VAT/tax configuration changes

Payment Terms and Methods

Configure how your organization handles payments and receipts.

Payment Terms Setup:

Define standard payment terms:

Common Payment Terms:

• NET 30: Payment due 30 days from invoice date

• NET 10: Payment due 10 days from invoice date

• 2/10 NET 30: 2% discount if paid within 10 days, otherwise net 30

• COD: Cash on delivery

• EOM: End of month

• 1/2 N/30: Half payment immediately, balance in 30 days

Payment Terms Configuration:

• Code and description

• Due date calculation (e.g., 30D = 30 days)

• Discount date calculation (e.g., 10D = 10 days)

• Discount percentage

• Calc. Pmt. Disc. on Cr. Memos

• Coupled to Payment Terms Code (for vendors)

Payment Methods:

Define how payments are made/received:

Common Payment Methods:

• Bank transfer

• Check

• Credit card

• Direct debit

• Cash

• Wire transfer

• Electronic payment (ACH, SEPA)

Payment Method Configuration:

• Code and description

• Bal. account type and number (for automatic posting)

• Direct debit mandates (for SEPA direct debit)

• Payment export format

• Payment type for electronic banking

Bank Account Setup:

Configure company bank accounts:

• Bank account number

• IBAN and SWIFT code

• Currency code

• Contact information

• Bank statement import format

• Payment export format

• Last statement number

• Balance last statement

Best Practices:

• Align payment terms with industry standards and cash flow needs

• Standardize terms across similar customer/vendor types

• Configure early payment discounts to encourage prompt payment

• Set up electronic payment formats for efficiency

• Maintain bank account reconciliation procedures

• Document payment processing workflows

Location and Bin Setup for Warehousing

Configure location and warehouse structures for inventory management.

Location Setup:

Location Types:

Basic Location:

• Simple inventory tracking

• No bin management

• Suitable for small operations or non-warehouse locations

Advanced Warehouse Location:

• Directed put-away and pick

• Bin management

• Warehouse employees

• Suitable for complex warehouse operations

Location Configuration:

For each location, configure:

General Information:

• Location code and name

• Address and contact information

• Use as in-transit location

• Location type

Warehouse Configuration:

• Require receive

• Require shipment

• Require put-away

• Require pick

• Bin mandatory

• Directed put-away and pick

• Use cross-docking

Bins and Zones:

For advanced warehouse locations:

Bin Configuration:

• Bin code (unique identifier)

• Zone code (grouping bins)

• Bin type (receive, ship, put-away, pick, quality control)

• Bin ranking (for directed put-away logic)

• Maximum cubes and weight

• Bin capacity policies

Zone Configuration:

• Zone code and description

• Bin type code

• Warehouse class code

• Special equipment code

• Zone ranking

Bin Creation Methods:

• Manual entry

• Bulk creation using worksheets

• Template-based creation

Inventory Routing:

Configure how inventory flows through locations:

• Transfer routes between locations

• In-transit location designation

• Shipping and receiving processes

• Cross-docking policies

Best Practices:

• Start with simple location setup, add complexity as needed

• Map physical warehouse layout to bin structure

• Use clear, logical bin coding schemes

• Configure bin rankings to optimize put-away and pick efficiency

• Train warehouse staff on directed put-away and pick processes

• Regularly review and optimize bin configurations

Item Categories and Attributes

Organize items for efficient management and reporting.

Item Categories:

Create hierarchical item categorization:

Category Structure Example:

Category Configuration:

• Category code and description

• Parent category (for hierarchy)

• Default posting groups

• Default values for new items

• Attributes assigned to category

Item Attributes:

Define characteristics for items:

Common Attributes:

• Color

• Size

• Weight

• Material

• Brand

• Power rating

• Warranty period

Attribute Configuration:

• Attribute name

• Type (Option, Text, Integer, Decimal, Date)

• Values (for Option type)

• Unit of measure (for numeric types)

Attribute Values:

For option-based attributes, define allowed values:

• Color: Red, Blue, Green, Black, White

• Size: S, M, L, XL, XXL

• Material: Cotton, Polyester, Wool, Silk

Using Attributes:

Leverage attributes for:

• Product configuration and variants

• Item filtering and search

• Customer-facing catalogs

• Reporting and analysis

Best Practices:

• Design category structure to reflect how users think about items

• Limit category levels to 3-4 for manageability

• Use attributes instead of creating separate items for variants

• Standardize attribute names and values across categories

• Document category and attribute usage guidelines

• Review and refine categorization as catalog grows

Configuration Documentation and Standards

Document configuration decisions for future reference and consistency.

Configuration Documentation Components:

Setup Documentation:

• G/L account purposes and usage rules

• Dimension definitions and value meanings

• Posting group mappings and logic

• Number series schemes and conventions

• User roles and permission sets

Configuration Workbook:

Maintain spreadsheet or database tracking:

• All configuration decisions made

• Rationale for each decision

• Date implemented

• Who requested/approved

• Related requirements

Standard Operating Procedures:

Document processes for:

• Creating new customers, vendors, items

• Processing different transaction types

• Period-end procedures

• User access requests

• Configuration change requests

Configuration Management:

Establish governance for changes:

• Change request process

• Impact analysis requirements

• Approval authorities

• Testing requirements before production

• Documentation update procedures

• Communication to affected users

Deliverables: Configuration Phase Outputs

Complete this phase with comprehensive configuration in place:

1. Configuration Checklist

Document completion of all configuration areas:

• ✓ Company information

• ✓ General ledger and chart of accounts

• ✓ Dimensions and analysis views

• ✓ Posting groups

• ✓ Number series

• ✓ User accounts and permissions

• ✓ Role centers

• ✓ Currency and exchange rates

• ✓ VAT/tax setup

• ✓ Payment terms and methods

• ✓ Locations and bins

• ✓ Item categories and attributes

2. Setup Documentation Standards

Comprehensive documentation including:

• Configuration decision log

• Account and dimension guide

• Posting group reference

• Number series conventions

• User role definitions

• Standard operating procedures

3. Permission Set Templates

Role-based security configuration:

• Permission set definitions

• User-to-role mappings

• Segregation of duties matrix

• Access review procedures

4. Chart of Accounts Structure

Complete financial structure:

• Chart of accounts listing

• Account descriptions and usage rules

• Financial statement mapping

• Consolidation account relationships

Conclusion: From Configuration to Capability

Thorough system configuration transforms Business Central from a blank canvas into a powerful business management platform tailored to your organization. The choices you make during configuration impact every transaction, report, and user interaction going forward.

Key Takeaways:

✓ Start with Standards: Leverage Business Central's built-in configurations as starting points

✓ Think Long-Term: Configuration decisions have lasting impact—plan for scalability

✓ Test Thoroughly: Validate every configuration in sandbox before production deployment

✓ Document Everything: Future you (and your colleagues) will thank present you

✓ Prioritize Security: Proper permission configuration protects data integrity

✓ Train Users: Even perfect configuration fails without user understanding

With solid configuration in place, you're positioned for the next critical phase: Data Migration Strategy & Execution, where you'll populate your configured system with business data.

Next in Series: Blog 4: Data Migration Strategy & Execution - Learn how to plan, prepare, and execute successful data migration from legacy systems to Business Central.

Download Resources:

• Configuration Checklist

• Chart of Accounts Template

• Permission Set Matrix

• Setup Documentation Template

Questions or Comments? Share your configuration experiences and challenges in the comments below.

This is Part 3 of an 8-part series on Business Central Implementation. Subscribe to receive notifications when new articles are published.

Tags: #BusinessCentral #SystemConfiguration #ERPSetup #Dynamics365 #FinancialManagement #Security